Bankruptcy does not get rid of all debts. You are still responsible for:

Alimony
Child support
Most recent back taxes
Most student loans
Recent large purchases of more than $550 for luxury goods bought within 90 days of filing
Fines or penalties of government agencies
Fraudulent debts
Cash advances of $825 within 70 days of filing

Bankruptcy Abuse

On April 20, 2005, the President signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act, which limits individual access to US bankruptcy courts. Some of the changes, which were effective October 17, 2005, included:

New bans on Chapter 7
Increased Chapter 13 payments
New presumptions against debtors with increased penalties
The reduction of judicial discretion to balance competing interests

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Chapter 7 Bankruptcy

Chapter 7, otherwise known as "liquidation," is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples, corporations and partnerships. A trustee (appointed by the court) gathers and sells your non-exempt property and uses the proceeds from the sale to pay your creditors. Most chapter 7 cases are "no-asset' case, which simply means that you do not have any non-exempt property for the trustee to sell.

Federal bankruptcy laws provide for a "means test" which will determine whether you are eligible to file of Chapter 7 bankruptcy. If your income is below the median income for families in Ohio, based on Census Bureau statistics, you will be eligible. If you make more than the median income for families in Ohio, your income over the past six months is considered, along with mortgage and car payments, back taxes and child support due, and school expenses up to $1,500 per year. You won't be eligible for a Chapter 7 bankruptcy if, after deducting these amounts, and the living expenses provided in the Internal Revenue Service's national collection standards, you can still pay at least $6,000 ($100/month) to unsecured creditors over five years. If you don't qualify for a Chapter 7 bankruptcy, your only option would be a Chapter 13 bankruptcy.

You must also obtain approved credit counseling before you can file bankruptcy and file any overdue tax returns within weeks of filing a Chapter 7 bankruptcy.

Filing Chapter 7

A bankruptcy starts with the filing of the official petition, schedules and a "statement of financial affairs" with the bankruptcy court. In order to complete the Bankruptcy Forms, you must provide a list of all of your creditors and the amount and type of their claim; the source, amount, and the frequency of your income; a list of all of your property; and a detailed list of your monthly living expenses. The filing fee for chapter 7 is $299.00.

As soon as you file for bankruptcy, your creditors are prevented from trying to collect on your debts through what's called an "automatic stay." The stay is designed to preserve your property and to give you a break from litigation.

341 Hearing

Usually between 20 and 40 days after you file your petition, the trustee will hold the "first meeting of creditors" (also called a "341 meeting" ).You must be present for that meeting. The trustee can ask you questions under oath about your property and debts. Creditors can also question you on those subjects, but seldom do.

What Can I Keep?

If there is no equity in your house (today's value less costs of sale less payoff balances on all liens and mortgages), the trustee in a Chapter 7 bankruptcy will abandon the house to you. That is, you keep it, as long as you keep the mortgages current.

A bankruptcy does not wipe out voluntary liens, like mortgages and deeds of trust, or tax liens. So the lender still has the right to foreclose if you do not pay. If you pay, everyone is happy. Remember, the lender does not want the property; it wants you to pay regularly on the loan. Foreclosure is a last resort for the lender if it concludes it can't get the owed money any other way.

If there is less than $5,000 in equity in your house, you can claim a "homestead exemption" and keep the house, as long as you pay the mortgages. If there is more than $5,000 in equity, it is possible you could lose your home. In that case, you may wish to consider a Chapter 13 bankruptcy.

If there is no equity in your car, after subtracting any car loan and exemption from the car's present value, the bankruptcy trustee will not take the car.

If you still owe money on the car, you can choose to reaffirm the debt to the secured lender. Under the new law, you have to reaffirm your car loan within 45 days after the "341 meeting." You no longer have the option of continuing your car payments without reaffirming the loan. Once the loan is reaffirmed, if you default on your payments and the car is repossessed, you are liable for the repossession deficiency.

Under Ohio bankruptcy laws, you generally can keep: