Chapter 13 Bankruptcy in Ohio
A person filing for bankruptcy under Chapter 13 is seeking the opportunity to repay some or all of their outstanding debts. Repayment is at a lower or no interest rate. Since the Chapter 13 process allows the debtor to use future income to repay creditors, filing Chapter 13 is an option for debtors who have a regular income and can make regular payments on the amount owed.
Under Chapter 13 of the United States Bankruptcy Code, a debtor must repay creditors within 3-5 years. A debtor filing Chapter 13 is allowed to keep all his or her property while creditor payments are made under the terms of the court-approved repayment plan. By law, the repayment must begin within thirty days after the filing.
There are several advantages to Chapter 13 over a Chapter 7 bankruptcy. Chapter 13 allows a debtor to cure arrears which he owes on his mortgage and auto loan, preventing the possibility of foreclosure or repossession. In addition, Chapter 13 allows a debtor to pay off secured debts, such as an auto loan at a reduced amount. Many non-dischargeable debts such as tax debts or arrears owed on domestic support obligations, such as Child Support may also be eligible. In Chapter 13, a debtor can eliminate a second mortgage if the fair market value is less than the payoff of the first mortgage. Although Chapter 13 Bankruptcy is a good option for some debtors, the most important criterion for a person to be eligible to file a Chapter 13 Bankruptcy is their ability to maintain a regular income.
How Does Chapter 13 Bankruptcy Work?
In a Chapter 13 filing in Ohio, a debtor is allowed to keep all his or her property while the court approves a reduced or interest-free repayment plan. Working with all parties, the attorneys for the individual filing prepare a written plan which details the terms of repayment. The plan includes the amount of the payments and the date(s) they are to be made. The plan must be approved by the court and court-appointed trustee before taking effect.
The debtor will start making direct payments to the trustee within 30 days. Eventually, payments will be required to be made through a wage withholding unless special circumstances exist. As the Debtor makes payments to the Chapter 13 trustee, the trustee will in turn make payments to the creditors.
Creditors are paid by the trustee in order of priority. Secured debts such as a mortgage and auto loan payments are paid first, followed by mortgage arrears, and priority debts such as tax debt and domestic support arrears. Unsecured creditors are the last to receive payment. The Trustee will pay a percentage of the total amount of unsecured debt as prescribed in the confirmed plan (the plan approved by the court). Once a debtor completes the terms of the Chapter 13 plan, the remainder of unsecured debt is discharged.
Chapter 13 File Limitations
Although Chapter 13 Bankruptcy is a good option for some debtors, it is not available to everyone. The most important criteria for a person to be eligible to file for Chapter 13 Bankruptcy is the ability to maintain adequate income for the payment into their Chapter 13 plan. Again, repayment takes anywhere from 3-5 years.
To file for Chapter 13, a debtor must show that he or she has filed both federal and state income tax returns during the three years prior to the bankruptcy filing date. The court may postpone bankruptcy proceedings to allow additional time for the debtor to become current on tax filings. The court will dismiss the case if the returns, or proof of the returns, are unable to be produced.
Disposable Income Outline
In order to qualify for Chapter 13 bankruptcy, you will have to show the bankruptcy court that you will have enough income, after subtracting certain allowed expenses and required payments on secured debts to meet your repayment obligations. Federal bankruptcy laws detail sources from which a Chapter 13 plan may be funded:
- Regular wages
- Income received from self-employment
- Wages earned from seasonal work
- Commissions from sales
- Pension payments
- Federal Social Security benefits
- Disability or workers’ compensation benefits
- Unemployment benefits
- Public welfare payments
- Child support or alimony
- Royalty payments, and
- Proceeds from the sale of property
If the debtor is a non-working spouse he/she can file alone and use funds from their working spouse as a source of income. Additionally, an unemployed spouse may file jointly with a working spouse.
A person with secured debts over $1,010,650 is not eligible to file Chapter 13 bankruptcy. Secured debt includes those items a person will lose if payments to the creditor are not made, including mortgages and car loans. A debt might also be secured if a creditor has filed a lien against the property for a debtor’s failure to pay a debt. In general, the creditor must have only a legal right to a claim in the actual item. In addition to the limit on secured debts, those with unsecured debts exceeding $336,900 may not file for Chapter 13. An “unsecured debt” is one in which a creditor has no legal right to a claim in a particular piece of property. A majority of debts are unsecured and include credit card debts, medical and legal bills and unpaid utility bills.
The Luftman, Heck and Associates Advantage
We at Luftman, Heck and Associates understand the emotional and financial strains of financial debt and the impact it can have on other areas of your life. We will be with you at every step to help ensure that you receive the fairness you deserve throughout your bankruptcy filing in Ohio. The attorneys at our law firms in Columbus and Cincinnati Ohio have great experience guiding clients through bankruptcy filings and will always strive for the best possible outcome on your behalf.
A bankruptcy attorney from Luftman, Heck & Associates will assist you in understanding the entire bankruptcy process in Ohio, from evaluating the options that will work best for you to negotiating the terms of the payment plan to appearing in court on your behalf. We will work as your advocate in bankruptcy court to ensure your interests and rights are protected. Remember, the creditors have legal representation on their side to support their interests. So should you.
In general, if you decide that filing Chapter 13 Bankruptcy is the best option for you, our attorneys will help you:
- Prepare a reasonable budget based on your income and ability to make payments
- Develop a process to communicate with secured creditors
- Prepare a Chapter 13 plan
- File the appropriate forms and pleadings
- Provide representation at any required meetings or court hearings
- Request a discharge once all payments under the plan are complete
Get an Ohio Bankruptcy Attorney on Your Side
If you or a loved one are looking for a bankruptcy lawyer in Ohio and are interested in learning more about Luftman, Heck and Associates LLP, please fill out a contact form or begin by completing the Ohio Bankruptcy Client Questionnaire. A member of the law firm will contact you directly to discuss your case in more detail and provide additional information about our bankruptcy filing services.