Can Individuals File Bankruptcy Petitions in Ohio?
The U.S. Bankruptcy Code is federal law, which means that every state interprets the bankruptcy laws the same way. Thus, as an Ohio resident, you can file a bankruptcy petition in the state, which is interpreted under federal law. Chapters 7 and 13 are available for individual filers. However, bankruptcy relief is not guaranteed. The court reviews your case to determine whether you qualify.
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Bankruptcy Code
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A majority of cases are filed under Chapter 7, 13 or 11. Chapters 7 (liquidation) and 13 (reorganization) are available to individual filers; whereas Chapter 11 involves the reorganization of business debt. Chapter 7 is often referred to as consumer bankruptcy because it mainly deals with consumer credit, such as credit cards. In every case, the court must determine whether you or your business qualifies for bankruptcy protection.
Automatic Stay
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When you file for bankruptcy in Ohio, the court gives you an automatic stay of protection. Creditors receive notice of your petition for bankruptcy and must suspend all collections efforts, including all contact with you. Creditors can only contact you through your attorney. The automatic stay does not prevent a creditor from filing an appeal to have its debt excluded from the bankruptcy petition. A creditor may opt to file an appeal if it believes you committed a fraud, such as excessive borrowing before you filed for bankruptcy.
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Means Test
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Once you file a petition with the court, you have 60 days to produce financial documents, which include tax returns, a list of assets and liabilities and a list of household income and expenses. The court uses a "means test" to determine your eligibility for Chapter 7. The means test compares your household income to a median household of similar size in Ohio. The next step involves estimating your disposable income. If your projected disposable income is $100 per month or $6,000 over the next five years, you most likely qualify for Chapter 7, which wipes out eligible debts. If your disposable income is $10,000 over the next five years, there is a presumption that you don't need to file Chapter 7.
Chapter 13
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If you have enough disposable income to pay part of your debts, you may qualify to file Chapter 13, which establishes a repayment plan with your creditors. In some cases filings, Chapter 13 is preferable if you have a debt that cannot be discharged in bankruptcy, such as a student loan, or if you fall behind on your mortgage or car payments and want to make up those payments over time to reinstate the original agreement. A typical Chapter 13 repayment plan can take several years.
Credit Impact
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It's a tough choice to file bankruptcy. Not only are you faced with the stigma, but your credit score takes a hit. The impact on your credit score is difficult to quantify; but the higher your score was before filing bankruptcy, the greater the negative effect. A Chapter 13 bankruptcy filing remains on your credit report for seven years, while a Chapter 7 can stay up to 10 years. Before you file for bankruptcy, consider alternatives such as reaching out-of-court settlements with your creditors or modifying your payment terms. However, if you face mounting collections calls and threats of wage garnishment and you don't expect a turnaround in your financial fortune, bankruptcy may be the only viable option.
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