• Chapter 7 is known as “straight” bankruptcy or “liquidation.” It requires a debtor to give up property which exceeds certain limits called “exemptions,” so the property can be sold to pay creditors.
• Chapter 11, known as “reorganization,” is used by businesses and a few individual debtors whose debts are very large.
• Chapter 12 is reserved for family farmers and fishermen.
• Chapter 13 is called “debt adjustment.” It requires a debtor to file a plan to pay debts (or parts of debts) from current income.

Most people filing bankruptcy will want to file under either Chapter 7 or Chapter 13.  Either type of case may be filed individually or by a married couple filing jointly.

You also only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 which is your equity if you sell it.

While your exemptions allow you to keep property even in a Chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a Chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law.  In most cases, you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.

If you live in Ohio, you must use the Ohio exemption law. You cannot use the federal exemptions.   You should consult a skilled bankruptcy attorney to discuss with you how Ohio exemption laws apply to your individual case. Ohio exemptions include:

• $21,625.00 in equity in your home;
• $3,450.00 in equity in your car;
• $525.00 per item in any household goods up to a total of $11,525.00;
• $2,175.00 in things you need for your job (tools, books, etc.);
• $1,075.00 in any other personal property;
• Your right to receive certain benefits such as social security, unemployment compensation, veteran’s benefits, public assistance, and pensions.

It is very important to note that the property exemptions apply to the individual person filing bankruptcy; if you file bankruptcy with your spouse, the exemption amounts are doubled.

If you live in Kentucky, you may claim the protection of the federal exemption law or the state exemption laws.  Most cases filed in Kentucky do use the federal exemptions and you should consult a skilled bankruptcy attorney to determine whether the federal or state exemptions should be used.

Federal exemptions include:

• $21,625.00 in equity in your home;
• $3,450.00 in equity in your car;
• $525.00 per item in any household goods up to a total of $11,525.00;
• $2,175.00 in things you need for your job (tools, books, etc.);
• $1,075.00 in any property, plus part of the unused exemption in your home, up to $11,625.00;
• Your right to receive certain benefits such as social security, unemployment compensation, veteran’s benefits, public assistance, and pensions.

Recently I had a case where my clients were the victims of just this scenario.  They had been owners of several rental properties, fell upon hard financial times, and had to file bankruptcy.  One of the banks filed a foreclosure action on its mortgage, but then dismissed it, seemingly because it didn’t want to be a “property owner” or it didn’t think it’d be able to sell the house to re-coop its loan.  Later, the house sold at a tax foreclosure sale.  Because the house was worth more than the taxes owed, there was actually money left over and being held by the court.

The clients hired me to help them obtain the excess funds.  The concern was that under Ohio law, they had to give notice to the bank that they were applying to have the funds distributed to them, and that the bank would try to intercede to satisfy its mortgage.

Luckily, I was able to successfully argue several points.  First, under Ohio law, the filing of an Entry of Confirmation of Sale frees the real estate of all liens and encumbrances, including mortgages, so that the new buyer takes title free and clear.  Second, the bank had failed to appear and assert its interest in the tax foreclosure.  The Ohio Supreme Court has held that a bank’s failure to appear, answer, establish, or defend a claim forever bars it from asserting a claim.  Galt Alloys, Inc. v. KeyBank Natl. Assn., 1999-Ohio-383, 85 Ohio St.3d 353, 708 N.E.2d 701 (Ohio 1999).  Third, the bank failed to respond to the notice of distribution, which acts as a waiver to participate in the distribution.  And finally, the bank’s failure to pursue its own foreclosure, or participate in the tax foreclosure, is a violation of public policy because they fail to follow through on taking title to homes, leaving the houses susceptible to break-ins, vandalism, and blight.

The judge ordered the excess funds to be distributed to my clients.  Score one for the little guy.

The Bootcamp is a 4-day intensive training course in the Bankruptcy Litigation Model which covers all areas of litigation in a consumer bankruptcy case.  Topics covered included discharge violations, standing to file proof of claims, navigating through the Fair Debt Collection Practices Act, and a variety of issues related to the securitization of mortgages and car loans.

If a consumer receives an abusive call from a debt collector, he or she can inform the caller that they may be in violation of the FDCPA. Since debt collection calls are recorded, the debt collector caller will usually back off at that point.

Consumers can also report that debt collection agency to the Better Business Bureau.  Also, debt collection agencies are not allowed to call your employer, though they will, but you can request that they don’t.   There are a lot of violations of the FDCPA by debt collection agencies that many consumers are not aware of.