Chapter 7 Bankruptcy- Does It Mean I Will Lose My House? My Car?

homesweethomeChapter 7 Bankruptcy is a powerful tool which can eliminate consumer debt, stop debt collection lawsuits in their tracks and allow debt-strapped consumers to open their mail and answer their phones again. But Chapter 7 is a “liquidation” process; meaning, a court official called a Chapter 7 Trustee is assigned to your case to determine if you have assets which can be liquidated (turned into cash) for the benefit of the creditors.

Before you panic, consider that the vast majority of Chapter 7 petitions result in “no asset” findings. That is, the Trustee ultimately decides there are no assets available to sell and the case is closed with the consumer keeping all of their property. This is because Ohio, like every state, has set up “exemptions,” which are laws designed to consumers to keep property as defined in their laws. Exempt property is property which the debtor can keep out of the hands of the Trustee and their creditors.

For cases filed between April 1, 2016-April 1, 2019, the chart below shows common exemptions allowed for consumer bankruptcies filed in Ohio.

Homestead (personal residence) $136,925
One Motor Vehicle $3,775
Cash on hand (in a bank account, or cash, total) $475
Aggregate household goods $12,625
Professional books, tools of your trade $2,400
Bodily injury award (slip and fall, car crash, etc.) $23,700
“Wild Card” used on any asset, can be stacked $1,250
Any single item of jewelry $1,600

So, for example, a consumer who owns a house outright (no mortgage) worth $100,000 will not lose their house in a Chapter 7 bankruptcy because it is exempt to a value of $136,925. But if that consumer owns a car worth $10,000 outright (no financing), they stand the risk of losing that car (but they will walk away with at least $3,775-the exempt amount- should the car be sold.

Exemption laws can be very tricky and the Chapter 7 trustees can be very creative about new arguments to liquidate property. Indeed, they are compensated based upon property they sell off. For these reasons, even a “simple” Chapter 7 requires the assistance of an experienced bankruptcy attorney to make sure that no property is lost. Call me at 216-642-8234 to schedule your free consultation if you are thinking about a fresh start in a bankruptcy proceeding.

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