Understanding Bankruptcy Law in Ohio
The power to establish bankruptcy laws is specifically mentioned in the US Constitution and the bankruptcy laws in our country have been in existence in some form for centuries, although sweeping changes were made to the consumer bankruptcy laws in October of 2005. Even the basics of the bankruptcy law are intricate and filled with pitfalls for the unwary. There are different kinds of bankruptcy filings with varied qualification and requirements. This article will provide a basic overview of the different available bankruptcies under the US Bankruptcy Code.
Chapter 7 Bankruptcy
Chapter 7 (Liquidation) is designed for debtors who do not have the ability to pay their existing debts. Individuals, corporations and partnerships are eligible to file Ch. 7. In consumer Ch. 7 cases, the household income together with many other factors is evaluated to determine eligibility of the individual. Such qualification does not exist for businesses. The law allows you to keep certain personal and real property, known as “exempt” property. Many people find that all of their property is exempt and they can keep everything while obtaining a complete discharge of all of their debts. Some particular debts are not discharged under the law. Thus, you may still be responsible for most taxes and student loans; debts incurred to pay non-dischargeable taxes; domestic support and property settlement obligations; most fines, penalties, forfeitures, and criminal restitution obligations; and debts for death or personal injury caused by drunk driving. There are other exceptions to discharge if a creditor can prove that the debt arose as a result of fraud, breach of fiduciary duty, theft, or from a willful and malicious injury.
Chapter 13 Bankruptcy
Chapter 13 (Debt Repayment) is designed for individuals with regular income who can afford to pay back all or a portion of their debts over a period of 3 to 5 years. Only individuals, not partnerships or corporations, are eligible to file Ch. 13, however, individuals who own business are eligible. The debts of a Ch. 13 debtor must meet the eligibility requirement of the Bankruptcy Code, specifically, as of April 1, 2019, noncontingent, liquidated unsecured debts must be less than $419,275 and noncontingent, liquidated secured debts must be less than $1,257,850 under 11 USC §109. These debt limits are adjusted periodically to reflect changes in the consumer price index. Most of the debts that are not dischargeable in a Ch. 7 case are not dischargeable in a Ch. 13 case either, with some exceptions.
Chapter 11 Bankruptcy
Chapter 11 (Reorganization) is designed for business but is also available to individuals. Generally, small businesses shy away from Ch. 11 as it is expensive, risky, time-consuming, and complex. However, Ch. 11 is the only bankruptcy option for a small business seeking to restructure and continue in operation if it is owned by a partnership, limited liability company, or corporation. Ch. 11 is also the only bankruptcy option for individual business debtors who want to reorganize but owe too much money to meet Ch. 13 eligibility requirements.
Other Bankruptcy Chapters
Chapter 9 bankruptcy is applicable to municipalities. Chapter 12 is designed to permit family farmers and fishermen to repay their debts over a period of time from future earnings similar to Ch. 13. The eligibility requirements are restrictive, limiting its use to those whose income arises primarily from a family-owned farm or commercial fishing operation.
How to File Bankruptcy
It is strongly recommended that persons wanting to file for bankruptcy seek a qualified attorney who can guide them thought the intricate and complicated process of the US Bankruptcy Code.