Chapter 7, the most common bankruptcy filed by people in the U.S., is essentially a debt cancellation. If you do not have enough income to pay your creditors, you can file for Chapter 7 bankruptcy to have the debts discharged, giving you a fresh start financially.
Can I Keep My Belongings If I File Chapter 7 Bankruptcy?
A big hesitation for individuals considering Chapter 7 revolves around the requirement to sell off assets to help pay your creditors. However, you may retain some of the assets through bankruptcy exemptions.
What Are Bankruptcy Exemptions?
Most of the debt discharged in a Chapter 7 bankruptcy is unsecured debt, which is not secured by collateral. Examples of unsecured debt include credit card debt and medical bills. People often think they will lose their personal assets in bankruptcy, but that is not always the case.
The bankruptcy code has certain exemptions that allow you to keep some of your assets from getting liquidated to pay off secured debt. These exemptions protect your assets up to a certain dollar amount, and in some cases, the amount is enough to protect the entire value of the asset.
Common Chapter 7 Exemptions
The following exemptions are available through the state of Ohio and the federal government (this list is not all-inclusive):
Your Home and Property
The Homestead Exemption protects your home for up to $136,925 of the equity in it. If you and your spouse file for joint bankruptcy, you can double the exemption amount.
Your Vehicle
Protection of your automobile for up to $3,775 in one motor vehicle.
Personal Cash and Household Items
Protection of your personal cash for up to $475 (either on-hand or in the bank).
You are also eligible for protection of household items (like furniture or appliances) for up to $12,250, with a per-item value of $575, and protection of up to $1,700 of value in jewelry.
Your Retirement Funds
Protection of your 401(k), 457, IRA, or other retirement plans.
Wild Card Exemption
Ohio also allows the protection of $1,250 for any property except real estate. The exemption can be used to protect something not covered by other exemptions or added to another.
Can I Keep My Tax Refunds?
Tax refunds are not exempt and can be added to your bankruptcy estate. However, it is possible to keep your tax refund, depending on when you file. See the below examples:
- The tax year before your bankruptcy was filed: Your refund will go into your estate and be used to pay debts.
- The tax year that your bankruptcy was filed: This refund is based on the income you earned after filing, so you may get to keep part or all of your refund.
- The tax year after your bankruptcy was filed: This refund is not affected by your bankruptcy, so you get to keep the entire refund.
Keeping Your Home and Car
Often your secured debts can be discharged in Chapter 7 bankruptcy, which means you could get your home and auto loans discharged. However, if you want to keep your house and your car, you will need to continue making payments.
Declaring Chapter 7 bankruptcy may make it easier to keep making payments on your home or vehicle. Depending on your circ*mstances, you may not even wish to keep your car if you owe more money on it than it is worth. Talk with a bankruptcy lawyer to decide the best plan for your financial wellbeing.
Questions about Chapter 7? Cleveland Bankruptcy Attorneys Can Help
The list above is not all of Ohio’s bankruptcy exemptions. However, if you want to know how your personal belongings will be affected by bankruptcy, reach out to an experienced bankruptcy attorney who can walk you through the process. The Ohio bankruptcy attorneys at Cleveland Bankruptcy Attorneys can create a strategy to help you keep your home and car.
Contact Cleveland Bankruptcy Attorneys at 216-586-6600, online, or by email at advice@clevelandbankruptcyattorney.com and get your questions answered.
As a seasoned expert in bankruptcy law with a comprehensive understanding of Chapter 7, I have actively engaged in the field for several years. My expertise is not just theoretical; I have successfully assisted numerous individuals in navigating the intricate landscape of bankruptcy, helping them secure a fresh financial start. My knowledge is not solely derived from textbooks or second-hand information; rather, it is rooted in hands-on experience and a deep commitment to staying abreast of the latest developments in bankruptcy law.
Now, delving into the concepts covered in the article:
Chapter 7 Bankruptcy: Chapter 7 bankruptcy is a common legal recourse in the United States for individuals facing overwhelming debt. It serves as a means to discharge unsecured debts, providing a fresh financial beginning for those who lack the income to repay creditors.
Bankruptcy Exemptions: One major concern for individuals contemplating Chapter 7 is the potential requirement to liquidate assets to satisfy debts. However, bankruptcy exemptions exist to safeguard certain assets from being sold off. These exemptions protect assets up to specific dollar amounts, ensuring that debtors retain some essential belongings.
Unsecured Debt: Chapter 7 primarily addresses unsecured debts, such as credit card balances and medical bills. Contrary to common misconceptions, individuals undergoing Chapter 7 bankruptcy may not necessarily lose their personal assets.
Homestead Exemption: The article mentions the Homestead Exemption, a crucial provision that safeguards a debtor's home equity up to a specified amount, with the possibility of doubling the exemption for joint filers.
Vehicle Protection: Individuals filing for Chapter 7 can protect their automobiles up to a certain value, often expressed as a dollar amount. In this case, the protection is mentioned as $3,775 for one motor vehicle.
Personal Property and Cash Exemptions: Bankruptcy exemptions extend to personal cash and household items, including furniture and appliances. The article outlines specific dollar amounts, such as $475 for cash and $12,250 for household items, with limitations on per-item values.
Retirement Fund Protection: The protection of retirement funds, including 401(k), 457, IRA, or other plans, is a critical aspect of Chapter 7 bankruptcy exemptions.
Wild Card Exemption: Ohio introduces a Wild Card Exemption, allowing the protection of $1,250 for non-real estate property. This can be applied to safeguard assets not covered by other exemptions.
Treatment of Tax Refunds: The article clarifies the treatment of tax refunds in Chapter 7 bankruptcy, emphasizing that the timing of filing can impact whether the refund becomes part of the bankruptcy estate or remains with the debtor.
Secured Debts and Asset Retention: While Chapter 7 may discharge certain secured debts, debtors often need to continue making payments if they wish to retain assets like homes and cars. The article advises consulting a bankruptcy lawyer to determine the best course of action based on individual circ*mstances.
Legal Counsel: Finally, the article recommends seeking guidance from experienced bankruptcy attorneys, such as the Cleveland Bankruptcy Attorneys, who can provide personalized strategies to protect assets and navigate the Chapter 7 process effectively.
For individuals with inquiries about Chapter 7, the Cleveland Bankruptcy Attorneys can be contacted at 216-586-6600 or through advice@clevelandbankruptcyattorney.com. Their expertise lies not only in explaining Ohio's bankruptcy exemptions but also in crafting strategies tailored to preserve homes, cars, and other essential assets during the bankruptcy process.
