Bankruptcy FAQ

Since 2005, the Bankruptcy Code has used a “means test” to determine whether a person will qualify to file a Chapter 7 bankruptcy. The vast majority of individuals who would have been eligible before the changes remain eligible now. For those who have a regular income and do not qualify under the means test for Chapter 7 bankruptcy, Chapter 13 bankruptcy is often an effective tool to regain financial health.

We can review your income, allowable expenses and determine if you are able to file under Chapter 7. Even if the means test disqualifies you from Chapter 7, we have found that we are still able to find debt solutions for people who have the desire and the need for bankruptcy relief.

Of the many changes to the bankruptcy laws in 2005, perhaps the biggest change was the means test. Under the means test, if you wish to file for Chapter 7 bankruptcy, your household income must be less than the median income for a household of the same size.

You can get current median incomes for Ohio and find a means test calculator here.

You can get current median incomes for Kentucky and find a means test calculator here.

If your income level is under this threshold, you are eligible to file Chapter 7 bankruptcy. If your income is over this level, there is an additional test to determine whether you qualify for debt relief under Chapter 7. Under this test, if your disposable income is lower than a certain level, you will also be eligible to file Chapter 7 bankruptcy.

It is important to understand that even if you do not pass the means test, you can still file for bankruptcy under Chapter 13. While Chapter 13 requires you to repay your debts over a three- to five-year period, it offers many of the same advantages as Chapter 7.

When you file bankruptcy can make a big difference in the amount of property you can retain and the taxes you owe. For example, federal tax debts more than three years old are generally dischargeable in bankruptcy, so you may wish to time your bankruptcy filing to take advantage of this provision.

Some of the many reasons you may wish to delay a bankruptcy filing include the following:

• You may wish to pay off certain creditors (such as family members) so that they get paid before your other creditors.
• Delaying bankruptcy may enable you to discharge additional tax debts.
• You expect your marital status to change.
• If you expect to get a tax refund, delaying bankruptcy can enable you to use the tax refund for your benefit.

There are many more reasons for delaying bankruptcy. However, you need to understand that the bankruptcy trustee can set aside certain transfers of property. You could even be charged with bankruptcy fraud if you are not careful.

Even if you do plan on postponing the actual filing of your bankruptcy, you should speak with an experienced bankruptcy attorney as soon as possible. 

If you have received a Chapter 7 discharge

You cannot file a Chapter 7 again until eight years from the date of your previous filing. On the other hand, you can file a Chapter 13 at any time after your Chapter 7 discharge, though discharge in the Chapter 13 may not be granted.

If you have filed Chapter 13 bankruptcy

You can file another Chapter 13 almost immediately after your discharge, though discharge under your new Chapter 13 may not be granted. Otherwise, you can file another Chapter 13 two years from the date of your prior filing, with the expectation that you will receive a discharge from your second Chapter 13. You can file Chapter 7 six years after the filing of your Chapter 13.

Often, debtors can successfully pay off their car, reduce or eliminate other debt, and keep and remain in their home by filing for bankruptcy more than once. 

Bankruptcy is a legal proceeding governed by the rules and procedures of the U.S. Bankruptcy Court. It is much different from other civil proceedings in federal court, however.

If you choose to file Chapter 7 or Chapter 13 bankruptcy, our firm will handle all aspects of your case, including dealings with your creditors.

Your primary responsibilities will be to:

• Provide us with accurate information about your income, debts and assets
• Attend a debt counseling session (in person, by phone or over the Internet)
• Appear before the bankruptcy trustee in a brief hearing

Before you enter the hearing room, your lawyer will explain the purpose of the hearing.

Here’s what you can expect:

The bankruptcy hearing will be held in a conference room, not a courtroom. A bankruptcy trustee will preside, not a judge. The hearing itself will not be confrontational or adversarial in nature. Rather, it will be conducted in a businesslike manner.

An attorney at our firm will be present to represent your interests. Your only responsibility in the hearing will be to truthfully answer a few questions under oath. While creditors are entitled to attend the hearing and make objections, they rarely if ever do so in consumer bankruptcies.

The bankruptcy laws provide generous exemptions that protect many categories of property. In fact, most people filing for bankruptcy can keep all of their property, including their homes, vehicles, personal possessions, retirement accounts and more.

Debt consolidation companies will advertise that debt consolidation is a good alternative that will allow you the same amount of debt relief without having to file for bankruptcy. In reality, bankruptcy is almost always a better option for individuals. Debt consolidation companies are not regulated by laws like bankruptcy attorneys and often make promises that they cannot keep.

Our firm develops a customized plan for every client. If you file Chapter 13 bankruptcy, we will make sure to structure your repayment plan in a way that enables you to live reasonably. With Chapter 13 and Chapter 7, the extra cash flow you receive will make it much easier to cover your living expenses, even giving you a little extra each month.

On the contrary, credit ratings tend to improve sometimes after filing bankruptcy. Within a few weeks or months, you will be able to buy a car on credit. If you are in Chapter 13, you may even be able to buy or refinance a home while you are still in bankruptcy.

One confusing element that deters individuals and couples from pursuing the benefits of bankruptcy protection is the often-asked question, “Do both spouses have to file for bankruptcy?” A commonly believed myth is that a married person cannot file for bankruptcy without filing jointly with his or her spouse. The truth is, individuals can file for bankruptcy without the participation of their spouse.

Many employers these days run background checks on job applicants, particularly for higher level positions. However, many people file for bankruptcy because of illness, a period of unemployment or other legitimate reasons. Be prepared to answer any questions truthfully, and then transition the conversation in a way that enables you to explain how the company can benefit by hiring you.

Often our prospective clients’ concerns regarding bankruptcy revolve less around financial issues and more about issues relating to who will find out about their bankruptcy, and what they will think.

This is understandable. Shame about excessive debt is almost universal, and almost everyone has experienced it. The truth is, though, that few people learn about others’ bankruptcies, and more and more people understand that bankruptcy is a valid, effective and commonly used solution to debt.

In addition, bankruptcy laws protect parties from taking adverse action against a person because he or she filed bankruptcy. For instance, bankruptcy laws include a specific provision prohibiting employers from discriminating against employees because they have filed for bankruptcy. And while bankruptcy actions are reported to credit agencies, they are not reported to local newspapers or otherwise generally broadcast.

It depends. Bankruptcy can complicate divorce; divorce can complicate bankruptcy. It is important to note that both Ohio and Kentucky will require you to address your marital debt during the dissolution of your marriage.

Divorce-related bankruptcy issues most often arise in one of two situations:

• A couple is still married, is contemplating divorce and wishes to resolve debt before the divorce.
• An individual is divorced and owes their former spouse for marital debt.

If you are contemplating divorce, a bankruptcy lawyer can work with both you and your spouse to quickly obtain the information you need. If you are already divorced, they can meet with you to discuss your options, including the advisability of filing Chapter 13 bankruptcy. In many instances, Chapter 13 bankruptcy can effectively free debtors from the obligation to repay debt to a former spouse following divorce.

People who are struggling with out-of-control debts need to know an important fact: If you file bankruptcy, most pension, 401(k) accounts and IRAs cannot be taken from you. By law they are exempt, meaning that they are out of the reach of creditors.

When you file Chapter 7 or Chapter 13 bankruptcy, most 401(k), IRA and pension accounts cannot be touched by creditors. In addition, many other assets are exempt, meaning they cannot be taken from you. The majority of people who file for bankruptcy can keep all of their property.

Before you draw upon your retirement accounts to cover everyday expenses, speak with a bankruptcy attorney at our one of our Cincinnati area locations. We have strategies that can protect your assets while providing relief from unmanageable debts.

If you are a lawful citizen or resident, you are awarded many of the freedoms that U.S. citizens are. One of these freedoms is the right to file bankruptcy if you are facing insurmountable amounts of debt. It is important to know that by filing for bankruptcy, your green card, visa and immigration status will not be affected.

The role of the trustee for Chapter 7 and Chapter 13 bankruptcy is slightly different. However, in both situations, a trustee will be assigned to your case toward the beginning of the process and have the responsibility of keeping your case moving forward.

In a Chapter 7 bankruptcy, the role of the trustee will be to sell off assets that are nonexempt and administer the bankruptcy estate. Not all Chapter 7 bankruptcies include selling off assets. In fact, most of them do not. In a Chapter 13 bankruptcy, the trustee is responsible for collecting monthly payments and distributing them to creditors. This is the only person who can collect payments under the repayment plan.

If you have outstanding debts, interest and service fees keep accumulating month after month. By not addressing your debt problems, your hole will only get deeper. At some point, you may be unable to make your monthly payments, triggering repossession, foreclosure or a creditor lawsuit.

Doing nothing is not an option. Filing bankruptcy stops the accumulation of interest fees, and the threats of repossession, garnishment, foreclosure and creditor lawsuits. A good bankruptcy attorney will develop a plan designed to obtain maximum debt relief while enabling you to keep as much property as possible. In some cases, it may make sense to delay filing bankruptcy or to seek a non-bankruptcy debt relief solution. 

Our firm frequently recommends other debt-relief strategies such as loan modifications and debt restructuring outside the bankruptcy system. If bankruptcy is not right for you, we will tell you so. However, be wary of debt consolidation agencies. They cannot protect your rights like a lawyer can, and they can expose you to possible repossession, foreclosure or a creditor lawsuit.