Reader’s Question: I owe on my house and 1 car and want to keep those, how do I do this if I file bankruptcy, also I am employed but have taken a serious cut in my income, I must keep my job but I don’t make enough anymore to pay my bills and I am behind on my mortgage.
Ohio Bankruptcy Attorney Russ Cope’s Answer
Loss of income is a very common reason for considering bankruptcy relief, especially in the age of government furloughs and shutdowns. Chapter 13 bankruptcy can protect your home and force the mortgage company to allow you to catch up on your mortgage payments. It can also eliminate a substantial portion of your unsecured debt (e.g. credit cards, medical bills, etc.) so that you have enough money to live on even after a reduction in income. The Chapter 13 would also protect your car that you owe on, even if there is equity in the vehicle.
It is more difficult to keep a house in a Chapter 7 if you are behind on the mortgage payments. However, there are bankruptcy planning strategies that could help you get caught up on the mortgage by strategically missing certain other debt payments. So long as you are current when the Chapter 7 is filed, or you can become current relatively quickly thereafter, then you will be able to reaffirm the debt with your mortgage company and keep the house. However, you must meet the income eligibility requirements in order to be able to file for Chapter 7. Your income is determined by calculating the last 6 months of income. This is called the Means Test. If your wages were reduced recently, then the 6-month average may still be too high to qualify for Chapter 7 relief.
It is important to contact a qualified local attorney quickly so that you understand all of your options.
A few Ohio specifics that may help: the Chapter 7 means test compares your last six months of income to Ohio’s median (currently about $66,239 per year for a single earner), so a recent pay cut can actually help you qualify once your six-month average drops. If you’re behind on your mortgage, Chapter 13 can stop foreclosure and let you catch up over time. To talk through your options, contact us for a free consultation.
About Russ Cope
Russ B. Cope is dedicated to legal standards that go far beyond filing cases — he is interested in your goals. Russ wants to be certain that each client is making an informed decision that will make their life better, and thrives on the interaction between lawyer and client.