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Qualifying for Chapter 7 in Cincinnati Ohio
Chapter 7 Bankruptcy, also known as a "liquidation bankruptcy", is available for individuals and businesses. It is a straight bankruptcy. It is the simplest and quickest form of bankruptcy available, but qualifying for Chapter 7 Bankruptcy is not always simple.
Due to 2005 bankruptcy law changes, debtors who wish to file Chapter 7 Bankruptcy must take a means test. Means testing identifies debtors who have sufficient financial means to repay a portion of their debts.
Debtors whose income is below the state's median income are not subject to the means test. Debtors whose income is above the median income in their state must use the available formula to determine if their income is too high to file Chapter 7 Bankruptcy. The means test can be a complicated formula, but it is generous, and many debtors have no trouble meeting its requirements.
Individuals, partnerships, corporation and other business entities may be able to file Chapter 7 Bankruptcy. They must, however, pass the means test, and meet the following requirements.
- A debtor may not have had a bankruptcy petition dismissed within the prior 180 days due to the debtor's willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.
- A debtor may not file Chapter 7 Bankruptcy if they have not received credit counseling from an approved credit counseling agency, either in an individual or group briefing, at least 180 days prior to filing for bankruptcy.
- A debtor may not file Chapter 7 Bankruptcy if they have sufficient income to repay their debtors and their median income is high for their area. The debtor attempted to defraud their creditors. A bankruptcy court may dismiss the bankruptcy case if the debtor has attempted to cheat creditors or attempted to conceal assets from the bankruptcy court.
Filing bankruptcy allows a debtor to discharge certain qualifying debts and start over, but not all debts are discharged. A bankruptcy discharge does not extinguish a lien on property, nor does it extinguish certain debts like student loans and some tax obligations.
Chapter 7 Bankruptcy discharges are only available to individual debtors, not to partnerships or corporations. Nevertheless, Chapter 7 Bankruptcy can be a good remedy for businesses under certain circumstances.
Filing Chapter 7 Bankruptcy protection has some advantages including:
- It brings faster financial relief. Only 5% of Chapter 7 Bankruptcy cases involve asset liquidations because most filers have few assets that the courts are interested in seizing.
- It stays on credit records longer, but it can make filers better credit risks because they do not carry ongoing payments.
- It is cheaper to file. The national average to file for Chapter 7 Bankruptcy is $700. Filing Chapter 13 Bankruptcy is $2400 on average.
- There is a higher success rate. Debtors are more likely to get a discharge of debts under Chapter 7 Bankruptcy. Up to 60% of Chapter 13 Bankruptcy cases are dismissed because clients fall behind on their payments.
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Not Everyone Qualifies To File for Chapter 13 Bankruptcy
In 2005, Congress passed the Bankruptcy Prevention Abuse and Consumer Protection Act to stop bankruptcy filers from abusing the bankruptcy system. The legislation was designed to make it harder for filers to file Chapter 7 Bankruptcy and immediately discharge debts. Instead, many debtors are forced into Chapter 13 Bankruptcy and must repay their qualifying debts using a 3 to 5 year debt repayment plan. Unfortunately, not everyone qualifies for Chapter 13 Bankruptcy.
Chapter 13 Bankruptcy, also called a wage earner's plan, enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.
If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years.
Filers must meet four criteria to file Chapter 13 Bankruptcy:
- Filers must file as an individual and not as a business. If you own a business you can file for Chapter 13 bankruptcy but as an individual. You can include business-related debts which you are personally liable to repay. Stock and commodity brokers cannot file under Chapter 13.
- You must have sufficient discretionary income. After you have subtracted your taxes, normal living expenses, and secured debt expenses from your gross income, you must have enough remaining income to service your unsecured debts within a given time frame.
- Your debt level cannot be too high. Secured debts cannot exceed $1,010,650 and unsecured debts cannot exceed $336,900.
- You must be current on your income tax filings. To file Chapter 13 Bankruptcy, you will have to submit proof that you filed your federal and state income tax returns for the four tax years prior to your bankruptcy filing date.
Once you qualify to file, you must create a repayment plan that follows Federal bankruptcy laws. After the plan has been developed and the court has approved the plan, you will make scheduled payments to a court appointed trustee who will pay your creditors.
If your plan is not confirmed and the case is dismissed, the court may authorize the trustee to retain a specified amount of money for approved costs, but all other funds paid to the trustee are returned to you.
If the plan is approved, you will continue to make the payments for the duration of the plan. After the plan has been completed, your creditors who were part of the bankruptcy plan can no longer seek relief for the debt you owed them. If you fail to complete the bankruptcy plan, the trustee can force you into a Chapter 7 Bankruptcy or allow the creditors to continue their collection efforts.
Chapter 13 Bankruptcy is complicated and time consuming. If you are in financial trouble and considering filing a bankruptcy, you might need help from a bankruptcy lawyer. If you need relief from the stress of debt and you live in or around the metropolitan area of Columbus, Ohio, contact us at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.
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Secured Debt - as defined in our Bankruptcy Glossary
Bankruptcy Petition: as defined in our Bankruptcy Glossary
Ohio Bankruptcy Law Information:
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