Cleveland Bankruptcy Lawyer Blog

Many bankruptcy clients are concerned that they will lose their car if they file for Chapter 7 Bankruptcy Protection. However, since transportation is usually necessary to maintain employment, fulfill family obligations and for countless other reasons, Ohio provides a specific exemption for automobiles in bankruptcy proceedings. The Ohio bankruptcy exemption for automobiles currently allows a person filing for bankruptcy protection to exempt their interest up to three thousand two hundred and twenty-five dollars ($3,225) in one motor vehicle. If you are filing jointly with your spouse, then you will be able to exempt a total interest of up to six thousand four hundred fifty dollars ($6,450). In bankruptcy, the trustee appointed to administer your case will be looking at your assets, including your vehicle, to determine if there are any non-exempt assets that could be taken and sold to re-pay your creditors some of the money they are owed. If your vehicle, in its present condition, is worth less than your available automobile exemption (as stated above) then you will be able to keep it and claim an exemption to protect it from creditors. However, if your car is worth more than the available exemption, then the bankruptcy trustee may claim an interest in your car which will need to be addressed. If you owe money on your car through a properly recorded loan then you will only need to exempt the amount of the equity in your car (if any) that exceeds the amount you owe. For example, if you owe five thousand dollars on your car and it is worth seven thousand dollars, then there would be two thousand dollars in equity subject to turnover to the trustee. However, you can use the automobile exemption to protect this equity and keep your car when you file for bankruptcy. If your vehicle exceeds the automobile exemption then there are other exemptions you may be able to apply and you should contact a bankruptcy attorney to discuss your case. Vehicles are treated differently in Chapter 13 Bankruptcy and, if you are considering filing Chapter 13 Bankruptcy, then you should discuss how your vehicle will be treated in your payment plan when you contact an attorney.

As bankruptcy filings in Ohio continue to rise, a growing concern among individuals we consult is that they may be fired or face other retaliation by their employer for filing for bankruptcy protection.

In the State of Ohio, like most other states, employment is considered to be “at will.” This means that an employee can generally be fired for any reason or even no reason, as long as it is not done in violation of certain public policy protections (more on this below). Likewise, an employee is free to quit their job with or without notice to the employer.

However, various state and federal laws limit an employer’s ability to fire employees or take any punitive or retaliatory action based on the employee’s membership in a protected class. These protections include age, disability, gender, marital status, race and national origin. Most individuals are unaware that the bankruptcy code also protects against employment discrimination.

The Bankruptcy Code Prohibits Discrimination Based on Bankruptcy Filing…

The Bankruptcy Code, at 11 U.S.C. sec. 525(b), states that "No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt."

The law further specifies that a person can qualify for the protections of this provision if:

1. The person is or has gone through a bankruptcy proceeding;
2. The person was insolvent, either before filing for bankruptcy or while the petition was pending; or
3. The person had not paid a dischargeable debt.

The purpose of this protection is to ensure that people seeking a “fresh start” through bankruptcy are able to maintain their employment.

Your Employer is Unlikely to Know You Filed Chapter 7 Bankruptcy Unless You Tell Them…

Although the aforementioned protections are important to ensure that employers do not discriminate against individuals seeking a fresh start through bankruptcy, it is unlikely your employer will know that you have filed unless you tell them.
Generally speaking, during your bankruptcy proceedings your employer will not be notified that you have filed a Chapter 7 bankruptcy and, therefore, will not know unless you decide to tell them (or unless they are a creditor of yours in any capacity).

However, please note that if you are filing a Chapter 13 bankruptcy then your employer will most likely be notified of your filing through a wage order prepared by your attorney and served upon your employer by the bankruptcy court. The purpose of the wage order is to fund your bankruptcy repayment plan in the Chapter 13. For more information on how a Chapter 13 bankruptcy works, contact an experienced bankruptcy attorney.

In summary, your employer will probably not know that you are filing for Chapter 7 bankruptcy protection unless you decide to tell them. Furthermore, if your employer does somehow learn of the filing or attempt to retaliate against or fire you because of the bankruptcy, you can avail yourself of the protections provided by the bankruptcy code. Individuals that are subjected to unlawful bankruptcy discrimination may receive back pay, including fringe benefits and reinstatement, and may also recover damages for emotional distress.

The automatic stay is a powerful provision in bankruptcy law that immediately stops nearly all collections and creditor actions against a debtor. The automatic stay is invoked automatically with the filing the case. There is no hearing is necessary, the stay arises automatically by operation of law upon filing the bankruptcy petition. This powerful injunction against collections is even effective against creditors that may have no actual knowledge of the bankruptcy filing!

Congress has stated that the public policy behind the automatic stay is to provide the “debtor a breathing spell from his creditors, stopping all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.” See Notes of Committee on the Judiciary, Senate Report No. 95-989. That “breathing spell” is a welcome relief to individuals and families facing overwhelming financial burdens.

The automatic stay provides significant and immediate relief upon filing because it strictly prohibits a creditor (with a claim that arose before commencement of the bankruptcy case) from taking any action to collect the debt including:

• contacting the debtor to request payment (stops collection calls)
• initiating or continuing a lawsuit against the debtor (stops lawsuits)
• enforcing a judgment against the debtor (stops wage garnishments)
• repossessing personal property or foreclosing on real estate (stops repossessions and foreclosure)

However, the automatic stay is a temporary injunction. The stay can be contested by a creditor through bankruptcy proceedings and lifted by the bankruptcy court after notice and a hearing if there is a justified reason for doing so (see a bankruptcy attorney for more information on this process). There are some exceptions to the automatic stay, for instance: the automatic stay does not prevent criminal prosecutions. Additionally, the automatic stay does not stop lawsuits to establish or modify alimony, maintenance, or support. If you would like more information about what actions a bankruptcy stay will stop, you should contact an experienced bankruptcy attorney.

Individuals that file for bankruptcy protection receive the powerful protections provided by the automatic stay immediately upon filing. However, the automatic stay is just one benefit of using bankruptcy to your advantage. Other benefits of a bankruptcy filing may include debt relief, stopping a garnishment or foreclosure and getting a fresh start (free from credit card and unsecured debt). If you are considering bankruptcy, a bankruptcy attorney can help you make the best decisions to use the benefits provided bankruptcy law to make the best decisions for you and your family.

Ohio residents considering filing for bankruptcy should give serious thought to hiring an experienced bankruptcy attorney. Although it is possible to file your own bankruptcy petition, there are many risks to doing so and you will probably find that the peace of mind you get from having an attorney to guide you through the process is well worth the legal fees you pay. Some important reasons you should hire an attorney include:

1. Hiring an attorney is more affordable than you might think. Our firm charges a flat fee and offers payment plans to our clients so we can usually make arrangements that will work for just about anyone.

2. An attorney can protect you from creditor harassment. For example, once our firm is retained you can refer your creditors to us when they call. Our firm will field the phone calls from your creditors and verify that we have been retained to represent you. After this, your creditors will stop contacting you and, instead, contact our firm for progress updates on the filing of your case. Once your case is filed creditors are prohibited by federal law from contacting you. To some debtors distressed by relentless creditor calls at all hours, this relief from creditor harassment alone may be well worth the legal fees you pay.

3. Hiring an attorney will protect you from making mistakes. Your attorney will make sure you comply with the often confusing bankruptcy laws, requirements and deadlines so you do not risk having your case dismissed or your discharge denied. Certain aspects of the new Bankruptcy Abuse and Consumer Protection Act, such as the "means test," can be extremely difficult to navigate alone and even a little mistake can result in dismissal of your case.

4. Your Attorney will make sure your bankruptcy paperwork is completed correctly. Many people make incorrect assumptions about how to prepare their bankruptcy petition. One of the most common assumptions is that you simply leave out things you want to keep, such as car, instead of properly scheduling it. In fact, a mistake like this could actually result in loss of the car or even dismissal of your case. It is important to realize what you do not know and, unless you have a strong understanding of bankruptcy practices and procedures, you probably should not risk filing your own case.

5. You may have to go to court. In some instances a bankruptcy case will involve motions, such as a motion for relief from stay, that will be set for hearing before a bankruptcy judge. If you do not understand the motion, the customs and procedures of the court or the legal arguments necessary to protect your interests, you could find yourself losing your rights to property, money or your discharge. An experienced attorney can make sure this does not happen and can handle most routine hearings (other then your meeting of creditors) without you even needing to be present.

6. You will need to understand how bankruptcy procedures, such as reaffirming a debt, will impact your rights and responsibilities so you do not get yourself into trouble or undertake an obligation you cannot handle, which defeats the purpose of filing for bankruptcy protection. Additionally, if you do not properly prepare your paperwork then a judge may not approve your reaffirmation and you could end up losing property you wish to keep such as a house or car.

In summary, I believe most people will find that the time you save, the relief you will get from creditors and the peace of mind that comes with knowing your interests will be protected and your case will proceed smoothly will more than make up for the reasonable legal fees you will pay for an attorney to handle your case. If you would like to learn more about how an attorney can help, please feel free to contact our law firm for a free consultation.

Prospective clients often ask how long they have to wait to file for bankruptcy protection under the Bankruptcy Abuse and Consumer Protection Act if they have previously filed. Here is a quick guide to the time periods that apply to re-filing:

• You cannot file Chapter 7 until eight years from the date of the previous filing
(not the date of discharge) of the previous Chapter 7.

• You cannot file a Chapter 13 unless you received a discharge under Chapter 7
more than four (4) years ago or under Chapter 13 more than two (2) years ago.

The above timelines refer to discharge dates (cases that were completed).

If you are currently in an active Chapter 13 bankruptcy that you cannot or no longer wish to complete, then there are provisions for converting a Chapter 7 to a Chapter 13. This might occur, for example, if you lose the job that is funding your Chapter 13 plan or decide that you no longer wish to keep your house.

To learn more about re-filing or the differences between Chapter 7 and Chapter 13, you should contact an experienced bankruptcy attorney.

Ohio is not the only state experiencing a significant rise in the volume of bankruptcy filings in 2008. According to statistics recently released by the Administrative Office of the U.S. Courts, there were 967,831 bankruptcy cases filed during the twelve-month period ending June 30, 2008. This is a 28.9 percent increase over the prior twelve months. Filings in the Northern District of Ohio (which includes Akron, Canton, Cleveland, Toledo and Youngstown) rose 18.3 percent over the same twelve-month reporting period, with filings rising from 24,577 during the last period to 29,066 during the current period. Given the continuation of the housing crisis, high unemployment and the uncertainty facing the auto industry in our neighboring State of Michigan (which will also impact Ohio due to the many automotive manufacturing jobs here), it is likely this number will continue to climb for the foreseeable future. If you are one of the many that need help and think you might benefit from a fresh start through bankruptcy, you should contact an attorney to discuss your options.

If you live in Ohio and are planning on filing for bankruptcy then a credit report can help you in several ways. Some of these include:

1. Ensuring that all creditors are listed and that the creditor names, addresses, type of debt, balances due and account numbers are accurate. This is important so that all creditors are given proper notice and all debts are accurately listed so they are covered by your bankruptcy filing.

2. A credit report may help us find creditors that you have overlooked or forgotten about. In order for a debt to be discharged, it must be properly listed, so it is important that we are aware of all of your debts.

3. Credit reports can alert our firm to judgments or pending lawsuits against you that need to be addressed and that you may not be aware of.

4. Credit reports can also alert us to liens against your property for which we may need to seek lien avoidance in order to protect your property.

5. The credit report could alert us to co-signers on some of your debts, which are important to list in your bankruptcy.

6. If you are married, then we might find items on your credit report that you are unaware of and the report will also help us determine if you should file individually or jointly with your spouse.

7. We may find out about debts that were incurred by a prior spouse, possibly without your knowledge.

8. The credit report may alert us to mistakes on your report and you can then take action to correct the mistakes.

9. The credit report often provides information on the collection agencies representing creditors for debt collection. This allows us to notify the collection agencies of the bankruptcy so that collection efforts stop.

10. If the Internal Revenue Service has a tax lien on your property, the credit report will alert us so that it can be dealt with properly.

11. Knowing what is on your credit report can help you take steps to improve your credit and get back on track to a better credit rating for important purchases after your debts are discharged.

Our law firm can provide Clients with a three bureau credit report that includes all information for the last ten years and is specifically prepared for use in preparation for bankruptcy filing. Our firm will provide you with a copy of the report for your review. To learn more about how a credit report can help you in bankruptcy, contact an attorney now.

A commonly asked question about bankruptcy is how long will it affect a debtor’s credit report. A bankruptcy filing will generally be reported on your credit report for seven to ten years. A Chapter 13 (repayment plan) will usually be reported for seven years, while a Chapter 7 (fresh start) will usually be reported for ten years. However, the actual length of time depends somewhat on the individual consumer credit reporting agency.

Your credit score will drop when the bankruptcy is first reported and then will gradually improve over time once you have received your discharge and as potential creditors begin to view you as someone with little or no unsecured debt (i.e., credit cards) that cannot file bankruptcy again for a while, rather then someone with a lot of debt that might file bankruptcy at any time.

You should also be aware that the bankruptcy court does not have any influence on your credit report and does not report any information directly to the credit bureaus.

After filing bankruptcy and receiving a discharge it is a good idea to obtain a credit report to make sure that the bankruptcy has been properly reported and that your debts are showing the proper status and/or have been removed. If your credit report has errors or discharged debts have not been removed, your bankruptcy attorney should be able to help you get your report corrected or guide you in what steps to take.

Under a recent federal law you are entitled to one free credit report per year from each of the three consumer credit reporting agencies. Each of the bureaus may have different information so you should check all three and correct any inaccuracies.

To get your free credit report you can write or call:

Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281
1(877) 322-8228

You can also contact any of the credit bureaus directly by clicking on the links below or calling the number listed:

Visit Equifax or call 1(800) 685-1111
Visit Experian or call 1(888) 397-3742
Visit TransUnion or call 1(800) 916-8800

Contact a bankruptcy attorney to learn more about how a bankruptcy may help you and how it will affect your credit.

Ohio Senate Bill 281 (“SB 281”) will become law in Ohio on September 30, 2008. This is good news for those in Ohio seeking bankruptcy protection. The most important aspect of SB 281 is that it increases several exemptions available to those filing for bankruptcy. What this means is that SB 281 increases the dollar value of certain property that an Ohio resident filing for bankruptcy may exempt from their creditors. Two of the most significant changes are large increases to the primary residence and automobile exemptions:

The exemption for the debtor’s property used as their primary residence increases from $5,000 (current law) to $20,200 (under SB 281).

The exemption for one automobile increases from $1,000 (current law) to $3,225 (under SB 281).

Ohio Senate Bill 281 also includes other increases to exemptions for recoveries for personal injuries, household items and more. If you are considering bankruptcy, you should contact an attorney to learn more about Senate Bill 281 and how it could help you keep more of your assets in bankruptcy.

If you live in Cleveland, Akron or Youngstown and find yourself considering bankruptcy, then you are certainly not alone. Bankruptcy filings in Northeast Ohio are on the rise and at their highest level since the surge just before the new BACPA law went into effect in October of 2005.
National Public Radio, WCPN 90.3 FM, reported that filings in the first six months of 2008 were nearly three times as high as the same period in 2007. Filings in Cleveland were the highest, followed by Akron and then Youngstown.

There are many reasons for this. For one, many homeowners are finding that they can no longer tap into the equity in their homes or, worse yet, their home is worth less than they owe on their mortgage. The job market in Ohio is also bleak and many companies are reducing employee hours and overtime to cut costs in the poor economy. Gas and food prices have also been rising steadily. Now the recent stock market collapse has made matters worse and threatens the retirement and financial security of many Ohio families.

If, like many in Ohio, you are struggling in these hard times, then bankruptcy may help you get back on track. Click here to learn how bankruptcy might help you.

Many Ohioans face the same conundrum ...if I can't pay my bills, then how can I afford to pay the attorney and filing fee to go bankrupt? Once you have resolved to file bankruptcy, then you may be able to stop making payments to some or all of your creditors. This will leave funds available to pay for your bankruptcy instead of using the funds to pay debts that will be discharged upon completion of your bankruptcy. Of course, you should consult with an attorney before you stop making any payments to determine if you can stop making payments and which creditors you must continue to pay.

The legal fee charged will depend on the nature and complexity of your case and you can usually get a quote by phone in your initial consultation with an attorney. There will also be a filing fee which is set by the Bankruptcy Court. In the Northern District of Ohio, the Chapter 7 filing fee is currently $299.00 (see Northern District of Ohio Bankruptcy Fee Chart for other fees).

In some cases you may be able to borrow funds through a small loan from a family member. However, if you do this you must be completely honest about the reason you are borrowing the money since they will become your creditor and the loan must be disclosed in your bankruptcy.

I do not suggest or advise that you incur additional debt from credit cards or an institutional lender for the purpose of filing bankruptcy and for this reason our firm cannot accept credit cards for bankruptcy payments.

If you expect to receive a tax refund, you could use the funds to pay for your bankruptcy and begin your new financial start rather then spending the money to catch-up on bills only to fall behind again and repeat the cycle.

A last resort may be to withdraw funds from or borrow against your retirement account such as an IRA or 401(k). Save this is a last resort because you may face steep penalties for withdrawal. However, you can usually exempt retirement funds from creditors in bankruptcy and, therefore, you may be better off to use a small portion of your retirement funds to pay for bankruptcy and discharge your debts rather then depleting your retirement funds in an attempt to pay for bankruptcy. See Ohio Exemptions: Bankruptcy May Save Your Retirement Fund for more on this topic.

As you can see, there are several options that may work to bring debt relief within your reach. Talk to an attorney to find out which option will work for you.

There are important Ohio exemptions that may protect your retirement fund in bankruptcy. It is unfortunate that many people make the mistake of waiting too long to consult an attorney when they find themselves unable to pay their bills. Instead of seeking legal advice, some people make a valiant effort to fend off creditors and pay down balances by tapping into their 401(k) or similar retirement fund. However, this approach usually involves significant early withdrawal fees and penalties and, even worse, it is rarely successful. This is due to the steep late payment penalties and compounding high interest rates on credit card debt which quickly cause the balances to drastically increase if you cannot pay them off lump sum. Sadly, dipping into their retirement funds often leaves these individuals in a much worse financial situation than if they had consulted an attorney first, used available bankruptcy exemptions to protect their retirement funds from creditors and discharged or repaid their debts through a well-planned bankruptcy.

To decide if bankruptcy is right for you, consult with an experienced bankruptcy attorney early in your decision process and as soon as you realize that you will not realistically be able to pay your bills or mortgage as they come due. Contact the law firm of J.M. Smith Co., LPA to speak with an attorney about your specific situation.