Bankruptcy Law

Chapter 7 Bankruptcy

At Steven M. Burke, Attorney at Law we have helped numerous individual and small business clients put an end to their financial nightmare by helping them file for bankruptcy. To learn more and to help you decide whether this is the right step for you we have put together the following information.

To qualify for relief under Chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. Relief is available under Chapter 7 irrespective of the amount of the debtor’s debts or whether the debtor is solvent or insolvent.

Married individuals are not required to file bankruptcy together. However, married individuals must gather information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse are required so that the court, the trustee and creditors can evaluate the household’s financial position.

If an individual’s current monthly income is LESS than the state median, one qualifies to file a Chapter 7 Bankruptcy.

If an individual’s current monthly income is MORE than the state median (See the chart below), the Bankruptcy Code requires application of a “means test” to determine whether the Chapter 7 filing is presumptively abusive. Many people who believe that they make too much to file Chapter 7 Bankruptcy are surprised to learn they qualify. Debtors should always have their attorney determine whether they qualify for a Chapter 7 Bankruptcy prior to considering a Chapter 13 since a repayment plan is required in a Chapter 13.

State One Person Two People Three People Four People
Ohio $40,471 $50,253 $58,376 $70,599
Michigan $43,677 $50,079 $58,467 $70,237

Individuals who are filing Chapter 7 must receive credit counseling from an approved credit counseling agency. After filing, individuals must take the Debtor Education course.

Debtors are allowed to keep certain “exempt” property, but a trustee will liquidate the debtor’s remaining assets. Accordingly, potential debtors should realize that the filing of a petition under Chapter 7 may result in the loss of property. Here are some examples of current exemptions:

Ohio Michigan (Federal Exemptions)
Cash / Bank Accounts $425 N/A
Motor Vehicle $3,450 $3,450
Household Goods & Furnishings, Apparel etc $11,525 $11,525
Real Estate $21,625 $21,625
Jewelry $1,450 $1,450
Tools of the Trade $2,175 $2,175
Retirement Accounts Unlimited Unlimited
Miscellaneous $1,150 N/A

Court costs are $306.00 in connection to a Chapter 7 Bankruptcy (comprising a $245 case filing fee, a $46 miscellaneous administrative fee, and a $15 trustee surcharge).

Filing a petition under Chapter 7 automatically stays most collection actions against the debtor or the debtor’s property. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments.

Between 21 and 40 days after the petition is filed, the case trustee will hold a meeting of creditors. During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding the debtor’s financial affairs and property. If a husband and wife have filed a joint petition, they both must attend the creditors’ meeting and answer questions. Bring your Driver’s License and Social Security Card.

The purpose of Chapter 7 Bankruptcy is to give an honest individual debtor a fresh start. Once a debtor receives a discharge, the debtor has no liability for discharged debts.

Some types of debts are not discharged: alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor’s operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances, and debts for certain criminal restitution orders.

A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered.