Westerville & Columbus, Ohio Bankruptcy Myths!
Bankruptcy in Ohio can solve many financial problems, but it’s not guaranteed to solve them all. In this article, we discuss some of the most common bankruptcy myths in Ohio. When you have questions about something you hear about a bankruptcy, please ask our attorneys at Wood & Brewer!
Bankruptcy Resolves All Financial Problems. Filing a bankruptcy petition may discharge some or possibly all outstanding debts. In some cases, however, it may be necessary for the client to execute a document to keep certain types of property and continue paying the underlying debt (i.e., car payments and mortgage payments).
No One in Ohio May File for Bankruptcy. Unfortunately, this bankruptcy myth is prevalent but it’s false. Bankruptcy laws in Ohio changed in 2005 but, when Ohio residents need the legal remedy of bankruptcy, it’s usually available to them.
In 2005, credit card issues and other parties lobbied Congress to eliminate bad faith bankruptcy filings. They wanted to make it much more challenging for consumers to file a bankruptcy claim in Ohio. Today, it’s more expensive for Ohio residents to file a bankruptcy petition. More documentation is needed, and additional hurdles must be navigated. These changes were put in place to deter some individuals from abusing bankruptcy to escape payment of debts.
Bankruptcy Discharges or Eliminates All Debts. This depends on the specific facts of each case. A bankruptcy discharge depends on whether the client files a Chapter 7 or Chapter 13 bankruptcy. When the individual files for Chapter 7, it’s possible to extinguish unsecured debts, such as past-due utility bills, credit cards, pay day loans and medical bills. When the individual files a Chapter 13 bankruptcy, the court requires a payment plan so that some debt is repaid over a three – five-year period. In both Chapter 7 and Chapter 13 bankruptcy, some forms of debt (e.g., unpaid student loans or child support) can’t be eliminated in Ohio.
Bankruptcy Destroys Credit Forever. Filing bankruptcy in Ohio will temporarily lower the client’s credit score. However, it can’t and won’t prevent the individual from establishing excellent credit in the future:
Bankruptcy remains on the individual’s credit reports at Experian, Equifax, and TransUnion for 7-10 years. While it’s completely rational for consumers to have concerns about bankruptcy and credit scores, it’s important to understand the nature of how credit reporting agencies (CRAs) analyze credit. Credit scores are fluid and quickly repaired. Post-bankruptcy behavior is essential in re-establishing excellent credit scores such as, but not limited to: paying mortgage payments on time, paying car payments on time, paying credit cards payments on time. Each positive action made after bankruptcy affects credit scores.
Bankruptcy Filers Lose Everything. Whether our client files a Chapter 7 or Chapter 13 bankruptcy, he or she doesn’t lose all property. The state of Ohio has exemptions that allow the petitioner to keep certain kinds of property.
If filing a Chapter 7 bankruptcy, he or she can keep all assets if there isn’t “excess equity” or mortgage payments aren’t in arrears. For instance, if a petitioner owns a house worth $100,000 and owns it outright, he or she has a $100,000 asset. This type of property is sold to repay the petitioner’s debt. It has value. If an asset doesn’t have value (or insignificant value), it isn’t considered for liquidation by the Trustee.
If our client files for Chapter 13 bankruptcy in Ohio, it’s possible to keep most or possibly all property. Chapter 13 is available to individuals who want to repay their debts over time. They’re unable to stay current with bills and payments currently and need the means to pay these debts over time. That’s why a Chapter 13 bankruptcy allows the petitioner to hold onto property by reorganizing debt and repaying the debt over a three – five-year period.
After a Bankruptcy, It's Impossible to Own a Home. We advise our clients that owning a home after/during a bankruptcy is possible! Our client probably won’t qualify for a home loan immediately after the discharge of bankruptcy but, within a time period of approximately 1-2 years, he or she may qualify for a home loan. It’s essential to rebuilding and establish credit after an Ohio bankruptcy.
Bankruptcy Petitioners Must File for Bankruptcy with Their Spouse. One spouse may have more debts than another, so filing an individual bankruptcy is a sensible option. When both parties have jointly held debts, it may be in their interest to file for bankruptcy together. But our clients aren’t required to file jointly just by virtue of being married. Both income/expenses of married couples will be taken into account.
Consumers May File for Bankruptcy an Unlimited Number of Times in Ohio. It may be possible to file for bankruptcy again in Ohio but doing so is dependent on when the petitioner initially filed a Chapter 7 or Chapter 13 bankruptcy (and the petition date of each case). For example: The petitioner may not file for Chapter 7 bankruptcy if they previously filed a Chapter 7 bankruptcy petition in the past eight years. Please contact Wood & Brewer for the other deadlines to be aware of!
An Employer May Fire Its Employee for Filing Bankruptcy in Ohio. Current or potential employers have the legal right to check the petitioner’s credit with permission, but the bankruptcy code in Ohio doesn’t allow the employer to discriminate against the individual or individuals in debt.
Wood & Brewer LLC has decades of experience helping individuals with their bankruptcy needs and questions. We invite you to contact us today for your free bankruptcy consultation.