Frequently Asked Questions About Bankruptcy

Bankruptcy is a legal way to have many debts forgiven and have much of your financial slate wiped clean. Bankruptcy is designed to help you eliminate (discharge) debts or repay them according to a manageable plan. Creditors can no longer contact and harass you, seize your possessions, or continue legal actions against you.

The United States Bankruptcy Code provides several ways for individuals to file bankruptcy. The most common types are Chapter 7 and Chapter 13, but there are also Chapter 11 (used by businesses and a few individual debtors whose debts are very large) and Chapter 12 (reserved for family farmers).

Chapter 7 bankruptcy is the most common form of bankruptcy, and it discharges most or all consumer and/or business debts. Once a petition is filed for Chapter 7, an automatic stay ends most collections against you. The court appoints a bankruptcy trustee responsible for collecting your nonexempt property and delivering the proceeds to the creditors. In Ohio, there are bankruptcy exemptions that list types of property that cannot be sold, including clothing, cars, equipment used for work (like tools) and household furnishings. If you do not own much property, your possessions may all be exempt. If your income is too low to pay credit card bills, medical bills, utilities, payday loans or personal loans, this may be your best option. However, if the “means test” determines you are not eligible for Chapter 7, Chapter 13 may still be an option.

Chapter 13 bankruptcy allows you to repay some or all of your debt over a three- to five-year period. Chapter 13 allows you to take control of your debt and allows you to cure secured debt that you have fallen behind on payments. Chapter 13 is also best for those who don’t qualify for Chapter 7, who have a steady income, temporary financial problems and a desire to repay some of the debt in order to keep an asset such as a car or a house. You make payments in affordable installments and avoid fees and fines, and phone calls and letters from creditors will stop. If you successfully complete the court-approved payment plan, the dischargeable debts covered by the plan are discharged.

Even if you file bankruptcy, you will still owe some kinds of debts. These include back child support, alimony, student loans and certain kinds of tax debts. You can read more about what debts are and are not dischargeable here. You may also choose to “reaffirm” a debt such as a mortgage on a home or a car loan and continue making payments if you wish to keep these assets. Bankruptcy does not protect cosigners on your debts. When a relative or friend has co-signed a loan, the cosigner may still have to repay all or part of the loan.

You cannot receive a discharge in a Chapter 7 case if you received a Chapter 7 discharge filed in the last eight years or a Chapter 13 filed in the last six years. You cannot receive a discharge in a Chapter 13 case if you received a discharge under a Chapter 7 case filed in the last four years or a Chapter 13 filed in the last two years. If you didn’t receive a discharge in these filings, you may file without time restrictions.

Bankruptcy may remain on your credit report for up to 10 years; however, it may actually be used to improve your credit. Although at first it may be tougher to get loans or low-interest credit cards, making the monthly payments for your basic bills usually strengthens your credit report. In time, you should be able to get a starter credit card that you pay in full each month, and rebuild your good credit.

If you have lived in Ohio for at least 91 of the past 180 days and you live in the following Counties: Franklin, Fairfield, Licking, Knox, Morrow, Delaware, Union, Logan, Madison, Pickaway, Fayette, Ross, Pike, Hocking, Vinton, Jackson, Gallia, Meigs, Athens, Washington, Morgan, Perry, Muskingum, Coshocton, Guernsey, Noble, Washington, Monroe, Belmont, Harrison or Jefferson , you may file at the U.S. Bankruptcy Court Southern District of Ohio Columbus Divisional Office, 170 North High Street, Columbus, Ohio 43215, (614) 469-6638. If you have lived in the following Counties: Montgomery, Greene, Clark, Champaign, Miami, Shelby, Drake, Preble, Warren or Clinton, you may file at the U.S. Bankruptcy Court Southern District of Ohio Dayton Divisional Office, 120 W. Third Street, Dayton, Ohio 45402, (937) 225-2516. If you have lived in the following Counties: Butler, Hamilton, Clermont, Highland, Brown, Adams, Scioto, or Lawrence, you may file at the U.S. Bankruptcy Court Southern District of Ohio Cincinnati Divisional Office, 221 East Fourth Street, Atrium Two Suite 800, Cincinnati, Ohio 45202, (513) 684-2572. If you’ve moved recently, you may have to file at the court for your old county. Check http://www.ohsb.uscourts.gov/ for updates.

While you can file bankruptcy without an attorney, the bankruptcy code is complicated and filled with extremely complex procedures and rules. Making mistakes can lead to your case being dismissed by the court without a discharge.