This firm and the firm of Markovits, Stock & DeMarco have undertaken a complex piece of real estate class action litigation against Build Realty, First Title, George Triantafillou and many others involving hundreds of victims. After many years and much discovery and motion work, the Motion for Class Certification has finally been fully briefed for Judge Douglas Cole. Many of our readers are following that litigation and check in for updates.

Attached are the following pleadings relating to that motion:

We would expect (but cannot assure) a decision on this motion sometime before the end of 2021 and then will advise prospective class members thereafter.  In the meantime, if you have questions, please contact attorney Chris Finney at 513.943.6655.

In business and personal commercial dispute resolution, clients come to us who either have been sued by someone and need a defense, or have been wronged by someone and desire to pursue that claim in court. For both, litigation should involve, among other factors, a risk versus reward analysis.

If you pay us “X” in legal fees and “Y” for expenses, will you obtain a better outcome than settling on even unfavorable terms (as a defendant) or walking away from a claim (as a plaintiff)?

Unfortunately, litigation is always a “bad option” for a host of reasons:

  • The simple math of the cost of getting the matter before a Judge for resolution.
  • The unpredictability of result. Even the best cases (from a defense or prosecution standpoint) are never as clear to a judge or jury as they are to you, and in many cases your attorney, who takes the role of being an advocate who believes in your case and in you.
  • When you bring a claim, will the defendant bring a counterclaim that you will need to defend? This is very frequently the path of litigation.
  • Related to the foregoing, rarely are cases as one-sided as the client tells us in the initial meeting. There frequently is one stray witness, one stray e-mail, one stray fact that does not make our client look exactly like Snow White when the case goes to trial.
  • Litigation disrupts personal life and business affairs. It is messy, time-consuming, distracting to family, neighbors, friends, clients and employees, who may need to testify at trial, gather voluminous documents, and be otherwise be distracted from life and business priorities.
  • Litigation has “collateral damage” associated with it: Bad publicity, disruption of partnership affairs, or alienating client and vendor relationships. Years ago, I had a client involved in litigation who was informed after years of study and volunteer activity that he could not serve as a deacon in his church because of his litigation. Another had his name plastered on the front page of the newspaper. A third was told by his bank to do business elsewhere.
  • In the middle of litigation can be business failure, death, divorce, insolvency, transfers of assets, etc.  In other words, just because someone appears to have assets that can be seized when a case is commenced, does not mean the assets will be there to collect after three or five years of fighting.

So, the important question for the client is: Is this fight worth these costs, distractions and risks to you?

I say the words “risk” and “reward” and very frequently, I wonder if clients only hear the word “reward.” I wonder if they really thoroughly assess the costs and risks involved in being in a courtroom.

Often, before a case is initiated, clients tell me it is the “principal” of the case, and more power to anyone in our society who acts out of principal. But just as frequently, after bills mount for three months, six months or a year, they would be happy just to settle for the legal fees they have incurred to that point, taking them back to where they started with our firm.  In the rear view mirror, the principal pales in comparison to the cost.  But the other party has spent the same or more in legal fees to get to that point, and is not interested in spending or conceding more on a settlement.

So, when I say litigation is  a “bad option,” I mean it. But the question is whether it is worse than the other options of defending a frivolous case or walking way from a meritorious case that — for a host of reasons — needs to be pursued.

What is a case really worth? As I recall, now-deceased Federal Judge Arthur Spiegel from Cincinnati encouraged litigants in his courtroom to look at a case this way:

  • As a Plaintiff, if you won, how much really will you collect?
  • And then what is your anticipated percentage chance of winning at trial?
  • If your collectible damages are $400,000 and you have a 75% chance of prevailing (no case is a 100% winner), the case has a settlement value of $300,000.
  • And then off of that comes the legal fees,  time and expense of moving forward with trials and appeals.
  • The same analysis applies to the defense side of a case.

I encourage litigants to make this analysis before they incur $100,000 or more in legal fees and suffer the other adverse consequences of litigation. Unfortunately, rare is the case — exceedingly rare — when both the Plaintiff and the Defendant are both willing to have that discussion before engaging in the mutually assured destruction that litigation almost always becomes.

But from your side, be sure to perform your risk-reward analysis before litigation commences or proceeds too far.

In the last year, our country has seen layoffs, shutdowns, job loss and shuttered businesses due to the pandemic.  The government has provided some assistance by way of stimulus checks, increased unemployment payments, and moratoriums on evictions and foreclosures.  This has temporarily eased concerns of those struggling financially and delayed their seeking legal advice for debt relief.  This has served to hold off, what is anticipated to be, a flood of bankruptcy filings.   Unfortunately, these are temporary solutions to a long-term problem.  As moratoriums end and stimulus checks are spent, debtors are searching for a resolution to their economic woes.  This article provides basic information on Chapter 7 Bankruptcy as a possible solution.  If you would like more information on consumer bankruptcy, please visit our law firm bankruptcy practice page at https://finneylawfirm.com/practice-areas/bankruptcy.

There are several types of bankruptcy a debtor can file: Chapter 7 (Liquidation), Chapter 9 (Municipalities) Chapter 11 (Business Reorganization), Chapter 12 (Family Farmers), Chapter 13 (Wage Earners), and Chapter 15 (Foreign debtors/ Courts.   After almost two decades of being a chapter 7 attorney, the clear preference for clients is filing a chapter 7.  The reason for this is that chapter 7 is cheaper and quicker than other types of bankruptcy filings.  However, it is not without its risks and downsides.

Chapter 7 is a “liquidation” bankruptcy.  A bankruptcy trustee will examine your income, expenses, assets and debts.  In order to qualify, you must be below a certain income level for your household size.  If you are not below this threshold, the case may have to be converted to another chapter of bankruptcy.  The trustee reviews the assets you own and what they are worth.  The trustee will subtract what you might owe to a secured creditor from the value of the asset and what is remaining is considered your equity.  State and/or Federal exemptions are available to protect basic assets up to a certain dollar amount.  These exemptions are applied to your equity in each qualifying asset.  If no equity remains after this calculation, then you are not at risk of the trustee liquidating that asset.  If equity does exist after the calculation, the trustee can sell the asset and pay your creditors a percentage of what you owe to them.  Most chapter 7 bankruptcy filings do not end in liquidation and are considered “no asset” cases.  In the event assets may be liquidated a debtor must be prepared to lose the asset or look at other options such as Chapter 13.

Before filing a bankruptcy case a debtor must take a credit counseling course. After the bankruptcy filing, a debtor must take financial management course.  If you seek the assistance of bankruptcy attorney, you will be tasked with gathering information and documents to assist the attorney in filling out the bankruptcy petition and schedules.  The petition and schedules will include information on all of your income, expenses, assets, and debts.  After these documents have been reviewed with the debtor and attorney and filing fees have been paid, the petition will be filed with the bankruptcy court.  A trustee will be appointed and a Meeting of Creditors will be scheduled.

Roughly six weeks after the filing of the case, the debtor will attend the Meeting of Creditors (currently held telephonically).  It is a short hearing where the trustee reviews your petition and clarifies its contents on the record.  If you have retained counsel, they will attend this hearing with you.  Creditors are allowed to attend this hearing and ask questions of the debtor regarding the debt or any collateral that secures the debt.  Following this meeting, the creditors have 60 days to object to your discharge.  If no objections are filed, the debtor will receive their discharge a few weeks later.

Chapter 7 can discharge many forms of debt such as credit card, medical bills, debt from repossession, foreclosures, and payday loans to name a few.  However, student loans, recent taxes and marital support or settlement debts cannot be discharged in a Chapter 7.  It is possible to keep a car or home that you own if it is protected under the appropriate exemption and you are current on payments to the secured creditor.

In comparison to Chapter 7 bankruptcy, Chapter 13 bankruptcy is a repayment plan over a period of three to five years.  It is intended for debtors who have enough income that they can pay back a percentage of their debts over a period of time, who may have non-exempt assets they could lose in a Chapter 7 liquidation, or who may get some benefit in a Chapter 13 that they cannot get in a Chapter 7.

Filing a bankruptcy is not always the answer or the only answer in some situations, however, if you are seeking a fresh start by filing for bankruptcy, contact bankruptcy lawyer Susan Browning at (513) 797-2857 for a FREE consultation.  Our firm employs lawyers in Cincinnati, Dayton, and Northern Kentucky who can guide you through the bankruptcy court process.

Today, the Cincinnati Area Board of Realtors/Dayton Realtors announced that it will be issuing a new form purchase agreement for residential transactions on September 1. The new form has been in the works for more than a year now.

From their release, here are some of the major changes in the new form:

Time is of the Essence:  All dates and time-frames are “of the essence” throughout the contract, with a special provision for the closing date.

 

Earnest Money:  No more separate dates for submitting the earnest money for deposit and notifying the listing agent.  There is one time-frame for doing both (default is 3 days). There is also a provision to address non-real estate brokers holding the earnest money, as the laws pertaining to its handling by real estate brokers does not apply to non-real estate brokers.

 

Inclusions/Exclusions:  The default for appliances, such as refrigerators, ovens, etc. is for all to be included in the sale, unless they are specifically excluded in Section 6b.  Surveillance, monitoring and security system items are also addressed, including cameras and controls.  Doorbells are also specifically listed as being included in the sale.

 

Seller’s Certification:  The Seller’s certification has a new look and a new item pertaining to the Foreign Investments in Real Property Tax Act.

 

There are changes to the HOA and financing sections that clarify seller and buyer responsibilities and timing.

 

A significant change has been made to the Inspection ContingencyThe buyer will no longer be able to “walk away” without providing the seller the opportunity to correct material defects – with few, specifically defined exceptions.  And, the seller is required to respond to the buyer’s request for repairs within the time-frame specified or be deemed to have agreed to make all requested corrections.

This blog will be updated with more details after the form has been released. Contact Jennings Kleeman (513.797.2858) or Chris Finney (513.943.6655) for more details.

Today’s Wall Street Journal includes this probing article on condominium maintenance and governance. Although the article addresses proposed changes to Florida law, the issues are similar in Ohio and Kentucky.

The issue raised by the collapse and the events leading up to it, and issues of condominium finance and governance, are highlighted by the article. These are important issues for condominium owners and buyers to carefully consider.

We are asked to review condominium documents

Frequently, we are asked to review condominium documents for a prospective buyer. The task sounds simple enough, and, of course, our buyer already wants to buy. And not to be a negative Nancy, but does our client really understand what he is getting into?

So, a small diversion on that topic.

We many times after an owner is in a condominium — sometimes years after the closing — receive a call from an owner who is really unhappy with communal ownership that condominiums represent. They don’t like the standard to which the common areas are maintained. They don’t want to follow the rules set by the association. They won’t like the dues assessed. They don’t like the conduct of their neighbors. Buyers should therefore appreciate that condominium ownership — be it high-rise, apartment style, or townhouse style — is fundamentally legally different that single family home ownership.   

Contents of condominium documents

In Ohio, Condominiums are “regulated” under R.C. § 5311, which contains some minimum requirements of condominium declarations. But, mostly, condominium declarations are a voluminous contract by and among the unit owners.  The declaration or covenants typically contain these major categories of contractual agreements:

  • Division of the real property (land and buildings) among:
    • Unit, which is usually the three-dimensional space defined by the interior surfaces of the perimeter walls of the area the owner is buyer.
    • Common areas, which is everything that is not a “unit.” Importantly, for this article, this is the foundation, exterior walls, parking garages and parking lots, roof, windows, exterior doors, patios, hallways, lobbies, etc.  Again, anything that is not a unit itself.
    • Limited common areas, which are portions of the condominium property that are common areas, but are limited in their use to a specific unit owner or fewer than all of the unit owners.
  • Limitations on use of the Common Areas, and in some cases the units themselves. For example, parking three-axle trucks, leaving child toys or erecting a basketball hoop might be prohibited.
  • The creation of the condominium association, which typically owns no property itself but is charged with maintaining the common areas.
  • Assessment of condominium dues in an amount set from time to time by the association whereby, primarily, the association maintains the common areas.
  • The right in the condominium association Board to set reasonable rules.
  • The right of the condominium association Board to place a lien against a unit and foreclose on a unit for unpaid assessments.
  • Attorney fee shifting from association to unit owner. What this shorthand means is that if a unit owner gets into litigation with the association and loses, he must pay the attorneys fees of the association. This is a powerful tool of the association in scrapes with the unit owner.

Notably, one of the things that is not usually in condominium documents is a minimum  required standard of maintenance of common areas. So, if an owner does not like how a parking lot or roof is maintained, the cycle on which garage doors are replaced or that exterior painting is done, the unit owner can either run for the Board himself (and assemble a majority) to make better decisions or he is largely “out of luck” on that issue.

What is a unit owner buying?

So, when a unit owner buys a condominium property, what he gets at the closing is a deed for (a) the unit and (b) a percentage ownership interest in all of the common areas of the development.  This is means if it is a multi-unit development, he owns a percentage interest in every roof, every foundation, every exterior wall, etc. And therefore he has a partial duty to pay to maintain all such areas. Further, that purchase is subject to the contractual agreements set forth in the Declaration.

This is a pretty big gulp with a lot of unknowns when you think about it. In other words, the buyer better read the contract, better like his neighbors, better understand the physical condition of the entire development and better understand the finances of the association (more on that below).

So, how does this intersect with the Miami disaster?

The news articles have hinted at, but have not stated directly, that some owners in the building understood that poor long-term maintenance meant problems for the building, and that over the years some favored higher dues and a better standard of maintenance and others were more frugal and thought the maintenance could wait. This would be typical push and pull between a condominium association and its members.

Well we now know without a doubt which side of that debate was correct — the building needed higher assessments and a much higher standard of maintenance.

Condition of common areas is important

But condominium buyers usually — in my experience — look primarily at the units condition in determining whether to buy, and not the condition of the building or entire condominium complex.  I have even had condominium unit buyers hire inspectors to inspect the unit, and I wonder: Why? The condition of the entirety of the building(s) is just as important.

Condition of association’s finances is important

And offsetting balances set forth in the Association’s reserves are critical for deferred maintenance issues, lest the new owners pay for maintenance costs that should have been set aside by the current and former owners.

What questions should a condo buyer ask?

So, in addition to understanding the condition of the unit being purchased, a buyer should ask two critical questions:

  • If I were buying this entire building as an investment, for example, is it in tip-top shape or are there significant deferred maintenance items? And in the case of the Miami building, are there red flags that would indicate significant structural issues that could cause physical harm or massive special assessments to fix long-lingering problems?
  • Has the association set aside sufficient reserves to address routine and deferred maintenance issues, or have successive Boards left a mess for future owners?

It’s complicated

The long and short of condominium purchaser and condominium ownership is: It’s complicated, and to really know what you are buying or “where things stand” with your condominium, one really needs (a) a full understanding of the condition of the common areas in addition to the condition of the unit, and (b) a full understanding of the association’s finances — especially its reserves for repairs — to really understanding what you are buying and what you own.

Contact Chris Finney (513.943.6655), Eli Krafte-Jacobs (513.797-2853 or Jennings Kleeman (513-797-2858) to discuss condominium purchase issues or owner/association disputes.

Finney Law Firm is pleased to welcome our two summer Law Clerks, both from the University of Cincinnati College of Law: Margo McGehee and Zach LeCompte.

Margo E. McGehee

Margo joins Finney Law Firm as a third-year law student at the University of Cincinnati College of Law, having spent her previous summer clerking for Alight Legal, PLLC in Washington, D.C. Margo spent the past semester interning with Magistrate Judge Litkovitz in the United States District Court for the Southern District of Ohio. Margo currently serves on the Executive Board of the University of Cincinnati Law Review and as Senior Articles Editor of the Human Rights Quarterly. Prior to starting law school, Margo obtained her bachelor’s degree summa cum laude from Western Kentucky University in economics and Arabic.

Zachary J. LeCompte

Zach joins Finney Law Firm as a third-year law student at the University of Cincinnati College of Law, having spent his previous summer interning with the United States Attorney’s Office for the Southern District of Ohio—Civil Division. Zach is also currently in his last semester of coursework in the Master of Business Administration program at the University of Cincinnati, and prior to his legal studies he earned a Bachelor of Science in Sport Leadership and Management from Miami University in 2016. Born and raised in Cincinnati, he is a passionate Bearcats and Reds fan.

Finney Law Firm attorney Casey Jones, who began her legal career as a Finney Law Firm summer Law Clerk, has ably recruited and is overseeing the firm Law Clerk program. For 2022 Law Clerk opportunities, contact Casey Jones (513.943.5673) or Katherine Fox (513.943.6668).

Ohio has a broad landlord/tenant statute, Ohio Revised Code Chapter 5321, that contains tenant protections that landlords throughout Ohio must follow.

But in addition to those procedures and protections, the City of Cincinnati has its own laws providing extra regulation of the landlord/tenant relationship. We have written about some of those here, including rental registration, late fee regulation, and security deposit regulation. As we address here, it also layers more regulation than set forth in the Ohio Revised Code Chapter 5313 for Land Installment Contracts.

Hamilton County alone has 49 cities, villages and townships. These laws apply only in the City’s 52 neighborhoods, and none of the areas outside of City limits.

Now Cincinnati has enacted one more landlord/tenant regulation: a “pay to stay” ordinance, similar to laws passed in Toledo and Dayton, that allows tenants facing eviction for non-payment of rent to assert that rent has been paid, or that rental assistance has been applied for, as an affirmative defense in any proceeding. Here are the details:

  • A tenant can cure his lease default and maintain a right to continued occupancy in property prior to the filing of an eviction action by paying the full amount of delinquent rent plus the statutorily-permitted late fee (see above). Typically, this would be after the provision of a statutory 3-day notice to vacate, but before the filing of the eviction action.
  • Additionally, a tenant can cure his lease default after the filing of an eviction action, but before a writ granting possession back to the landlord, by paying (a) back rent in full, (b) up to $125 in attorneys fees, and (c) the court costs of the eviction action.

For assistance in landlord/tenant matters, contact Julie Gugino at 513.943.5669.

 

As employers begin recalling their workers, the topic of mandatory vaccinations has seemingly taken center stage. Of course, employers have a duty to provide a safe working environment to their employees. However, employers also have a countervailing duty to engage in a good-faith interactive process to accommodate the disabilities or sincerely held religious beliefs of their employees.

There are certain persons who suffer from disabilities that do not permit them to be vaccinated. While the ADA permits employers to have a “qualification standard” that employees do not pose a direct threat to the health or safety of individuals in the workplace, if this standard tends to screen out disabled employees, the employer must show that there is a “significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation.” In order to make this showing, the employer must first engage in a good-faith interactive process with the employee to accommodate the disability.  Because the use of teleworking became more prevalent during the pandemic, continued telework is likely to be considered a reasonable accommodation for office workers. On the factory floor, the continued use of masks may also serve as a reasonable accommodation under the ADA for these disabled workers.

Because Title VII protects workers from religious discrimination in the workplace, employers should also take care to properly address requests for religious accommodation made by employees who wish to decline the vaccine on the basis of a sincerely held religious belief. The accommodation process here is similar to the process followed under the ADA.

To better assess the risk that unvaccinated members of the workforce may pose in the workplace, an employer is permitted to ask its employees whether they have received the vaccine, as such a question is not considered a “disability-related inquiry.” However, employers should be wary of adopting this route, as the information gleaned must be stored in a file separate from the employee’s regular personnel file, and further inquiries into the reason for receiving or not receiving the vaccine may not be permitted.

The topic of employers requiring vaccines as a condition of employment presents numerous pitfalls. And as with most aspects of the law, navigating it will not be subject to a one-size-fits-all approach. Employers and employees should consult experienced legal counsel to be fully advised of their rights and obligations under the law. If you need assistance with these matters, feel free to consult Stephen E. Imm (513.943.5678) or Matthew S. Okiishi (513.943.6659).

 

Cincinnati homeowners may obtain a Community Reinvestment Area (“CRA”) tax abatement by renovating existing residential structures. This practice is common and reduces tax liability for homeowners who make such renovations. That said, recently, various homeowners with existing CRA Tax Abatements suffered a reduction in their existing CRA Tax Abatement. This issue was as new to us as it may be to you.

To preemptively clear up the foregoing issue for others, this blog post will discuss a background of the CRA Tax Abatement Program for existing residential structures, the importance of submitting the application in a timely manner, and how the Hamilton County Auditor’s Office, which has a duty to make appraisals, and can make such appraisals based on its own preferred method, calculates Tax Abatements.

Background

The CRA Tax Abatement Program is meant to stimulate revitalization, retain residents, and attract new homeowners, in the Cincinnati area. To encourage the foregoing types of behavior, the City of Cincinnati Department of Economic Development provides CRA Tax Abatements to certain homeowners who renovate existing residential structures (e.g., residential homes and residential condos, up to three units). To qualify for a CRA Tax Abatement, the cost of renovations must total at least $2,500.00, or $5,000.00, depending on the number of units in the residential structure. Some renovations, which might increase the marketability of a residential structure, are not contemplated in the cost of renovations (e.g., roofing, windows, gutters, vinyl siding, etc.) Likewise, unrelated improvements and tax on the land itself are not contemplated in the cost of renovations.

To apply for the CRA Tax Abatement Program, applicants will need to submit an application to the City of Cincinnati Department of Economic Development. Applicants who are renovating existing residential structures must pay an application fee of $250.00, which may be paid by check, to the “City of Cincinnati.” Also, applicants will need to submit evidence showing that all permits related to the renovations are closed. Applicants may obtain such evidence here. Finally, applicants will need to submit a document evidencing the costs of the renovations. Such evidence should be in the form of a notarized list indicating (i) the general categories of the work completed; (ii) the date such work was completed; and (iii) the expenses, including costs of labor, associated with each category of work completed.

Timing of the Application

Under the CRA Tax Abatement Program, the Hamilton County Auditor’s Office can set a CRA Tax Abatement Period for, at most, ten years, unless homeowners comply with LEED, LBC, or HERS standards, which are not discussed herein. That said, under the CRA Tax Abatement Program, the applicant cannot apply for the abatement until renovations are complete, and the CRA Tax Abatement is not applied to the residential structure until the application has been submitted.  Despite those rules, the abatement period begins when the renovations are commenced. Furthermore, it might take the City of Cincinnati eight weeks to respond to the application. As such, an applicant should complete their renovations and apply as quickly as possible to avoid missing out on their CRA Tax Abatement period.

Calculation of the Abatement

The Hamilton County Auditor’s Office recently started calculating CRA Tax Abatements under the “Percentage Method.” Under the Percentage Method, the Hamilton County Auditor’s Office determines a homeowner’s CRA Tax Abatement amount by dividing the contributed value of all the improvements, at the time construction began, by the value of the home without improvements. The purpose of the Percentage Method is to provide homeowners with a percentage that remains consistent, despite changes in home values.

Before the Percentage Method, the Hamilton County Auditor’s Office calculated CRA Tax Abatements under the “Beginning Value Method.” Under the Beginning Value Method, the Hamilton County Auditor’s Office determined a homeowner’s CRA Tax Abatement amount by subtracting the value of the home without improvements from the contributed value of all the improvements, at the time construction began. The Beginning Value Method created an issue where homeowners were unable to truly appreciate the value of their CRA Tax Abatement, because, when their property value increased, the value of their abatements did not, leaving them with little tax liability savings.

Due to the foregoing issue, the Hamilton County Auditor’s Office reacted by creating the Percentage Method. Despite its best intentions, the Hamilton County Auditor’s Office did not provide for grandfather clause for the various homeowners, with CRA Tax Abatements, who were content with their CRA Tax Abatement Valuation. This gave rise to the issue first described in this blog post, which the Finney Law Firm resolved for similarly situated homeowners. So, if you are a similarly situated homeowner and need professional guidance on how to remedy such issue, call the Finney Law Firm, today!

Are you looking for guidance on how to deal with oppressive debt? You may be thinking that you need a big-time law office to protect you and your assets. That may be the case in some legal situations, but when it comes to a consumer bankruptcy, you need a local bankruptcy attorney to handle your case.

If you are looking for information on the bankruptcy process you need a Northern Kentucky, Dayton, or Cincinnati bankruptcy attorney. Local attorneys will have the ability to provide more accurate legal advice regarding the nuances of bankruptcy laws and how the Bankruptcy Court in your district applies those laws. It is possible for a bankruptcy debtor to file without representation, but bankruptcy can be a difficult legal area to navigate. You should never assume that your case is an easy one.

When other avenues have failed to solve your financial problems, credit card debt continues to grow, you have creditors harassing you, wage garnishment has been ordered or you are facing foreclosure or repossession, it may be time to find out about the different types of bankruptcy. For more information visit our bankruptcy practice page.

The Bankruptcy Code allows debtors who qualify to file a bankruptcy case. Typical consumer debtors may be eligible for filing chapter 7, chapter 13, or chapter 11 in some circumstances.

Chapter 7

Chapter 7 bankruptcy is a liquidation. The trustee in the case is responsible for determining what assets the debtor has, whether there is any equity above and beyond what the debtor can protect through state or federal bankruptcy exemptions and collecting and distributing the proceeds to creditors who file a proof of claim. Most chapter 7 bankruptcies do not result in a distribution to creditors. This is usually due to a thorough investigation by debtor counsel prior in preparation of the bankruptcy case.

A chapter 7 debtor must qualify to file based on their income. The income received in the six months prior to filing is averaged to determine if the debtor is above or below the median income for their state and household size. If the debtor is above the median income there is an additional calculation called the “means test” that considers necessary expenses of the debtor. If, after the necessary expenses are deducted from the income, there is enough money left to pay a reasonable percentage to unsecured creditors, the debtor will not qualify for chapter 7.

Whether there is a distribution by the trustee or not, the chapter 7 will result in a discharge of certain debts. Credit card, medical, deficiency balances after surrender of secured collateral, some tax debts are examples of debts that may be discharged.  However, there are some obligations that cannot be discharged. Domestic support obligations, property settlements through divorce, recent tax debt and student loans are types of debt that may not be discharged in chapter 7.

A chapter 7 has limited benefit if a debtor is trying to keep a home or vehicle that is in default. Depending on the circumstances a debtor will delay a foreclosure while trying to work out a loan modification with the mortgage company. In the case of a default on a car loan it may be possible to “redeem” a vehicle for the value of the vehicle rather than what is owed. However, this may require a replacement loan or lump sum of cash.

Chapter 13

A chapter 13 bankruptcy is a repayment plan, or a “wage earner’s plan”. There are many reasons a debtor will choose to file a chapter 13 instead of a chapter 7. If the debtor’s income is too high and there is disposable income left over after calculating income and necessary expenses the court will find the debtor ineligible for a chapter 7 and require a payback of a percentage of the debt over a three-to-five-year period.

If the debtor has assets, they would lose in chapter 7, and therefore a chapter 13 is an avenue to keep those assets while paying back at least the value of the non-exempt asset over the life of the plan. The debtor must pay the greater of the value of the non-exempt equity or the disposable income, whichever is higher.

There may also be benefits a debtor could take advantage of in a chapter 13 that they would not have at their disposal in a chapter 7. A debtor in default on a home loan may catch up on the arrearage over the life of the plan while paying the regular monthly payment if their income is sufficient to do so.

If a debtor intends to keep a car subject to a lien the car must be paid off during the plan. If the car was purchased more than 910 days prior to filing the debtor will pay what the car value is at time of filing rather than what they owe. In addition, the interest will be adjusted to what is called “Till” rate which is prime plus a risk factor. The benefit here for some clients could be significant if the debtor had rolled in negative equity in the car loan through a trade in or if the interest rate is high, such as those seen in title loans and buy here pay here lots.

Another benefit of chapter 13 is the dischargeability of property settlement agreements through a divorce decree. In contrast, as domestic support obligations are never dischargeable, arrearages on these obligations, as well as past due tax debt, can be paid off in full during a chapter 13 plan.

Chapter 11

A chapter 11 is what is referred to as a “reorganization’. It is typically thought of a business bankruptcy. The usefulness of the chapter 11 for a consumer debtor is when a debtor does not qualify for a chapter 7 due to high income and does not qualify for chapter 13 because the amount of the filer’s debt is higher than the limit allowed in a chapter 13.

If you are seeking legal advice on what type of bankruptcy is right for you, please contact Finney Law Firm for a free consultation with local Northern Kentucky, Dayton, and Cincinnati bankruptcy lawyer Susan Browning, (513)797-2857.