Fear about losing your home should not keep you from reaching out to a Bankruptcy attorney to learn your options. You never lose anything by getting informed about your rights.
It is very unlikely that you will lose your house in a Chapter 7 Bankruptcy in Ohio.
Ohio Exemption Laws, http://codes.ohio.gov/orc/2329.66 provide a comprehensive list of interests protected by all individuals who live in Ohio, including $145,425 equity in a house or mobile home as long as, at the time of filing, you, your spouse, or one of your dependents lives in the home. If you own the home jointly with a spouse, and you both file for debt relief, you each can claim the exemption, for a total of $290,850.00. On the other hand, if you own the home jointly, and only one of you files, then only the value of your one-half interest needs the exemption.
To understand further, let’s define our terms.
The value of the house is the amount you can sell it for.
Equity is the value minus the amount of any outstanding mortgage.
Exempt Equity is the amount of equity in the house that is protected from your creditors, in Ohio $145,125.00
Non-Exempt Equity is the amount of equity that exceeds the amount you can protect from your creditors.
So, in our first example: If the value of the house is $250,000.00 and you owe 150,000.00 on the mortgage, your equity is 100,000.00 which is exempt, or fully protected.
In our second example: If the value of the house is $350,00.00 and you owe 150,000.00 on your mortgage, the equity is $200,000.00. If you own the house jointly and you both file, you may claim up to the full $290,850.00 as exempt, so the entire $200,000.00 in equity in that case is exempt. If you own the home jointly and only one of you files, that is still not a problem because you only need the exemption for the value of your one-half interest. If, however, you are the sole owner of the house and are filing alone, then $145,125.00 of the equity is protected and the remaining $54,575.00 is not protected. (Though, if married, that amount will be reduced by the value of your spouse’s dower interest, which can be calculated).
But do not despair. The fact that you have some non-exempt equity does not mean that you automatically lose your house. This is just the beginning of the analysis. A successful bankruptcy requires planning, and you have every right to plan.
The biggest mistake some people make in this situation is planning without understanding that there are some lines we cannot cross. Some people transfer their house into a ‘family trust’ thinking that will protect the house. That would be very unlikely. Some people ‘quit claim’ the house to a friend or relative. Please do not do that. It will not protect your house and it will cause a lot of harm.
Then there are choices which, while not illegal, are less than helpful and cause a lot of harm. One example of this is cashing in a 401k to pay off debt. A 401k is another protected asset (in any amount) and when you cash it in to pay debt, you are giving to your creditors an asset that they have no power to take from you. And, to make matters worse, you end up with a lot of tax debt that may be more than you can comfortably pay.
The Bankruptcy Code provides multiple options, depending on the kaleidoscopic variety of facts in each individual case. The analysis always has to start with a complete and accurate discussion of your particular facts. Or, as we like to say, “Every case turns on its own facts.”
I urge you to consult with an informed and experienced attorney before taking any steps to protect your assets. It is a lot harder to unwind an unwise choice than it is to make an informed choice from the start.
And nobody has to file for Bankruptcy just because they come to my office and get legal advice. That is the whole point of legal advice—to figure out what your options are. It may be a bankruptcy case under Chapter 7, Chapter 13, or even Chapter 11 depending on the facts. Or it may be no bankruptcy at all, but an exploration of other options. Ultimately you are in control of both the choice and the timing. The attorney’s job is to help you understand your choices, and the likely outcome of each choice. To do that competently, your attorney needs complete information, but we help you develop that information by asking all the right questions.
In my office we start with the questions on the financial worksheet. This document asks basic questions about who you are, what you own, and the creditors that you owe money to. We also ask about any property that you have transferred in the last four years, and any loans you have repaid to friends or relatives. (If you are thinking about doing something like that, please don’t—not until you have consulted with an attorney). That is just the basic outline. By the time the interview is over, the worksheet will have many handwritten notes from the interview discussion. That is the time when we answer your questions.
The wonderful thing about the bankruptcy code is that your questions do have answers. One of the great pleasures of my practice is to be able tell people with certainty, “You do qualify for debt relief, and you will not lose anything.” That certainty brings such relief. And if you provide complete information at the first interview, I can let you know with certainty one way or the other at the first interview.
So, if the question is, “Can I keep my house if I file Bankruptcy?” The answer is yes, it is very likely.
Please do not take anything I say here as legal advice. This is general discussion. What is right for one person is not necessarily right for another. We always need the complete set of facts before we can give advice. To retain an attorney to represent you please contact us.