We are Columbus, Hilliard and Reynoldsburg, Ohio Bankruptcy Attorneys
The attorneys at Nobile & Thompson have over 50 years of combined experience handling bankruptcy issues from both a debtor and creditor point of view. Over that time, we have answered many questions and concerns from our clients as to the bankruptcy process. Below are answers to some of the most frequently asked questions.
WHAT IS BANKRUPTCY?
Bankruptcy is a legal process in which people who cannot pay all of their debts can get protection from their creditors and eliminate their debts in whole or in part. The goal of a bankruptcy is to obtain a discharge of indebtedness which permanently stops Creditors from pursuing the collection of the debt.
WHAT TYPE OF DEBTS CAN BE INCLUDED IN BANKRUPTCY?
When filing for bankruptcy, you are required to disclose all of the debts you owe. Most debts can be eliminated in bankruptcy, but there are some exceptions. Some of the types of debts that are commonly eliminated through a bankruptcy filing include check-cashing loans, credit cards, personal loans, medical bills, utility bills, some income-tax debts, and money owed due to the repossession of certain items like automobiles.
WHAT ARE THE DIFFERENT TYPES OF BANKRUPTCY?
The two types of bankruptcy that are filed most often are Chapter 7 and Chapter 13.
The most common type of consumer bankruptcy is Chapter 7. This type of bankruptcy can be thought of as a personal liquidation. In Chapter 7 bankruptcy the court will appoint a person known as a “trustee”. The Chapter 7 Trustee’s job is to liquidate all property that is not exempt (or is in excess of what he or she may keep under law). Once the Trustee has liquidated any non-exempt assets, he or she use the money raised to pay creditors. More often than not, people who file Chapter 7 are able to keep all of their assets except assets that are considered very valuable or property that is subject to a lien that cannot be avoided under law or assets that people can no longer afford to make payments on.
The second most common type of bankruptcy is Chapter 13. This type of bankruptcy is a form of financial reorganization in which individuals are often able to keep all of their property. Individuals who file a Chapter 13 bankruptcy establish a repayment plan (usually at a small percentage of the actual debt owed) in which they make a monthly payments to the Chapter 13 Trustee over a period of time, usually between 36 months and 60 months. The Chapter 13 Trustee’s job is to oversee the administration of the Chapter 13 Plan and to send the payments to the Creditors. The Chapter 13 Plan allows an individual to reduce the amount of money he or she must pay back to their creditors and to possibly reduce the monthly payment that is required to pay back the debt. A Chapter 13 Plan is also a way of catching-up past-due mortgage and car loan payments over the life of the Chapter 13 Plan. Some individuals choose to enter into a Chapter 13 repayment plan rather than a Chapter 7 liquidation because some debts which cannot be discharged in Chapter 7 bankruptcy are able to be discharged in Chapter 13. Also some people who have property that is more than what they might be able to keep in Chapter 7 bankruptcy file a Chapter 13 to allow them to keep their property. Oftentimes, more assets are protected in a Chapter 13 bankruptcy than are protected in a Chapter 7 bankruptcy.
WHICH ASSETS CAN I KEEP IF I FILE FOR BANKRUPTCY?
When filing bankruptcy, you have a right under law to claim specific property as exempt (exempt property is property of yours that neither your creditors nor the Trustee can take to use to payback creditors). The right to claim property as “exempt” is an important part of ensuring that the person going through bankruptcy with have a fresh start.
In the State of Ohio, some examples of exempt property are equity in your home, equity in a motor vehicle, household goods, and tools of the trade. Several other types of personal property are also exempt. These include most retirement plans and many government benefits such as social security and unemployment payments. However, depending on the exemption claimed, there may be dollar-amount limits on the amount of equity that can be protected from creditors.
The type of bankruptcy filed also has an affect on the amount of property a person may be able to keep. In general, you are able to keep more property in a Chapter 13 bankruptcy than in Chapter 7 bankruptcy.
WHAT IS THE DIFFERENCE BETWEEN BANKRUPTCY AND A NEGOTIATED DEBT-SETTLEMENT PLAN?
There are two main differences between bankruptcy and debt settlement.
First, only bankruptcy can provide you with a legally-binding discharge of your debts. A discharge is an order from the United States Bankruptcy Court that prevents your creditors from ever attempting to collect on the debts that you currently owe. The bankruptcy court discharge is permanent. Should a creditor violate the discharge, you may have the right to file a lawsuit against the creditor for the discharge violation.
In a negotiated debt-settlement plan, your creditors voluntarily agree to accept less than the amount that is owed. A person’s credit report might show that the debt was settled; however, unless creditors agree to provide a person with a legally-binding release, debt settlement does not provide any legal protection.
The other main difference between bankruptcy and debt-settlement is that the bankruptcy discharge is permanent and binding on creditors. A bankruptcy discharge provides you with a “fresh start” that enables you to recover financially while you rebuild your financial life and credit. With negotiated debt settlement there is usually no legally binding release provided by creditors. Therefore, it is possible that at some point in the future, a person could be again pursued by debt collectors who may try to collect a debt that a person believed had been settled. Because of the lack of a legally-binding agreement, it can become very difficult to reestablish credit after a negotiated debt settlement.
IF I AM MARRIED, MUST MY SPOUSE FILE WITH ME?
No, your spouse is not required to file bankruptcy with you, nor do you need your spouse’s permission to file bankruptcy individually.
CAN I BE FIRED FROM MY JOB IF I FILE BANKRUPTCY?
No. The United States Bankruptcy Code contains provisions protecting those people who seek bankruptcy relief. These provisions also protect against the denial of future utility service and of some government-granted licenses and permits.
WHAT WILL HAPPEN TO MY CREDIT IF I FILE BANKRUPTCY?
While it is true that bankruptcy will not improve to your credit score, bankruptcy does result in a “discharge”. A discharge is a legally binding document that prevents your creditors from attempting to collect debts you may never be able to pay back. Once discharged from debts you might never be able to pay, you are able to then begin rebuilding a good credit history. You will no longer have the unpaid accounts, debts in active collection, and unsatisfied judgments that make it impossible to obtain good credit therefore making it easier to reestablish a good credit standing.
A filed bankruptcy can stay on a person’s credit report for ten years, however that does not mean you must wait ten years before you can be granted credit again. Often a person can financially recover and start rebuilding credit much sooner. Many people who have filed a bankruptcy have obtained a federally- guaranteed home mortgage and purchased a home just a few years after they filed bankruptcy. The same is true for auto loans.
WILL MY FILING FOR BANKRUPTCY EFFECT OTHER PEOPLE?
When a person files a bankruptcy case, he or she does so as an individual. Bankruptcy does not make a
spouse or anyone else responsible for paying your debts. The only other person who is responsible for paying your debts is the co-signer on an existing debt. The co-signer of the debt is responsible to repay the debt if you don’t, just as he or she already agreed to repay the account by co-signing with you. Often, the person who files for bankruptcy will continue payments on the co-signed debt, thereby protecting the co-signer from any harm.