Do I Qualify for Bankruptcy in Ohio?
No matter which chapter of bankruptcy you file for, there will be qualifications and limitations. This is to ensure that the bankruptcy system isn’t used in bad faith, but as a real debt management tool.
There are 3 chapters of bankruptcy that individuals file though: Chapter 7, Chapter 11, and Chapter 13.
While each of these chapters have the same goal— helping you regain control over your debt— not every individual is eligible to file for every type. Keep reading below to see the qualifications for each.
Chapter 7 Bankruptcy
Chapter 7 is a liquidation plan, meaning this type of filling is best for those who may not have the financial means to enter into a repayment plan necessitated by the other chapters. This is because a large amount of unsecured debt (medical bills, credit cards, etc.) are ultimately forgiven through the bankruptcy process.
To qualify for Chapter 7, you must pass a Means Test.
This test compares your income to that of similarly sized households. If the test finds that you are earning below this median income level, you will be allowed to file for Chapter 7.
Chapter 13 Bankruptcy
Dubbed the wage earners plan, Chapter 13 aims to restructure an individual’s debt into manageable monthly payments which are paid in full at the end of a 3-5 year period. As such, Chapter 13 maintains the following eligibility requirements:
- You Must Earn a Wage
When you file for Chapter 13 bankruptcy, you are entering a repayment plan. For the bankruptcy courts to trust your participation in regular debt repayment installments, you must have proof of a steady income. Without meeting this qualification, you will not be eligible and instead would file for Chapter 7 Bankruptcy.
- You Must Be Under the Debt Threshold
A debt threshold is the maximum level of debt you can have while still remaining eligible for filing Chapter 13. Not all debt, however, is equal. As such, there is a different threshold for each kind of debt.
- Secured Debt Threshold: $1,257,850
This category of debt is any kind of loan that has collateral should you default. Common examples include mortgages and car loans.
- Unsecured Debt Threshold: $419,275
On the other end, this type of debt is not backed by collateral. Common examples here include student loans, medical bills, and credit card debt.
- You Must Be an Individual
Chapter 7 and Chapter 13 are both bankruptcy plans that are made for individual filing only. This means if you are a corporation or even a sole proprietor, you will not be eligible to file.
Chapter 11 Bankruptcy
Chapter 11 is in a class all its own, providing relief to businesses (from sole proprietorships to large corporations) and individuals who do not qualify for relief under the above two chapters. While the most complex bankruptcy to execute, Chapter 11 acts as a catch-all and has more lenient debt caps and qualifications by comparison.
- $394,725 in unsecured debt credit cards, medical bills, utilities, etc.)
- $1,184,200 in secured debt (house, vehicle and other collateralized obligations)
A Bankruptcy Lawyer for Life’s Difficult Decisions
An experienced bankruptcy attorney is more than someone who files your paperwork, it's an individual trained to know the law, know the exemptions, and know which will have the best outcome for your financial freedom.
I became a bankruptcy attorney to help individuals who have an unmanageable amount of debt take control of their financial well being. This is a concrete way I can take my training as a lawyer and give back to the community one case at a time.
As such, it is my mission to make bankruptcy educational, understandable, and accessible even if you don’t know where to start.
Ready to take control of your debt? Contact us at 216-241-2510 to speak with a bankruptcy expert in Cleveland, Ohio.