If You Have Debt: Consider a Chapter 7, and Contact A Bankruptcy Attorney ASAP (If Only to Learn Your Rights!)
I’ll preface this post by stating that I have filed more than 400 chapter 7 bankruptcies for Central Ohio residents in the past 3 years. I have seen many different kinds of chapter 7s; Business, individual, rich individual, poor individual, medical related, job-loss related, and everything in between.
A chapter 7 bankruptcy resets all* your debts to $0.00. Many Ohio residents are burdened with tens-of-thousands-of-dollars in driver’s license reinstatement fees, medical debt, credit card debt, personal loans, payday loans, utility balances, old phone bills, old cable bills, car repossessions, evictions, lawsuit judgments, bank overdraft fees. All of those, and more, will be completely forgiven in a chapter 7 bankruptcy. AMAZING. In my experience, a very high percentage of Ohioans have more than $10,000 in debt. Why live with this stressful, burdensome, ever-growing debt? YOU SHOULDN’T!
Federal & Ohio law combine to protect many, if not all, your assets (property, belongings, etc.) and still file chapter 7. Does that sound too good to be true? Yes, but it’s true. The amount of people that could benefit tremendously from a chapter 7 bankruptcy is staggering. I think the only thing standing in the way of many more Ohioans filing bankruptcy is lack of knowledge of their bankruptcy rights. Every time I tell someone about the benefits of chapter 7 the response is the same: “Why doesn’t everyone do this?!” EXACTLY.
It’s a sad truth that most people will not be able to get out from under their debt without coming into a windfall of money. The reasons for that are: (1) criminally high interest rates, (2) unfair late fees, (3) fraudulent administrative fees, and the list goes on. (Not-so-funny story: I recently filed a bankruptcy in which a credit card company filed a claim with a principal balance of $0.50, and late fees/interest/administrative fees of $9,500+. I, of course, objected. But that’s the kind of stuff I’m talking about!!). In fact, many of my clients have exhausted all their assets over years to attempt to pay off their debt, only to find themselves in the same situation they started. The problem with using all your assets PRIOR to contacting a bankruptcy attorney, is that MANY times I can protect those same assets, as I mentioned above, EVEN IF you file bankruptcy. That means all your debts would be forgiven, and you would still have your 401(k), IRA, pension, house, car, etc. Of course, I understand the idea of trying to pay your debts to avoid filing bankruptcy, but it’s also very beneficial to be realistic in these situations and save yourself as much money as possible through the process.
Maybe the best feature about a chapter 7 (vs. a chapter 13) is that it only lasts about 4 months. From the day I file your case, to the day you receive a discharge from all* your debts, it is only about 4 months. And it only includes 1 court hearing (this hearing often takes less than 5 minutes, and is only designed to ensure that you didn’t conceal any assets).
Another reason I like chapter 7 so much is from a fairness standpoint. I like the way the Federal government set-up the chapter 7 code. Unlike a chapter 13, not everyone is allowed to file a chapter 7. “Access” to the chapter 7 bankruptcy benefits is protected by the “means test.” Simply put, the “means test” is a calculation of how much money you make. The result of the “means test” determines whether or not you qualify for the chapter 7 benefits.
1. Single person is allowed to make: $46,242 and still file for chapter 7 benefits
2. family of 2 is allowed to make: $57,938
3. Family of 3: $68,361
4. Family of 4: $83,040
5. Family of 5: $91,440
*All figures as of 7/27/2017.
So although many of us do qualify for the benefits, those that make too much money do not qualify. I like this barrier from a fairness perspective.
-Lucas Ruffing, Bankruptcy Attorney