A frequent question asked by Clients filing Chapter 13 Bankruptcy Clients is how much cash they can keep. Chapter 13 Bankruptcy is different from Chapter 7 Bankruptcy insofar as the Chapter 13 Trustee doesn't take your property. Instead, in a Chapter 13 Bankruptcy you have to pay your creditors at least what they would get in a Chapter 7 Liquidation.
In Chapter 13 Bankruptcy, your Bankruptcy Attorney must develop what is called a Liquidation Analysis. The Liquidation Analysis is calculated using the value of your property less exemptions you are entiled to claim under applicable state or federal law. In Ohio, as of the date this article was written, an individual is entitled claim an exemption of $500.00 in cash and $1,325.00 in any personal property including cash. In addition, an individual can claim and exemption in 75% of the wages they earned in the preceding 30 days. Furthermore, certain payments like Social Security Benefits are exempt regardless of their amount. Accordingly, the amount of cash that is exempt depends on a number of factors including the amount of money, the timing of when it was received and the nature of the income which produced the money.
For example, using a simple cash savings of $3,000.00 that was acquired from a non-exempt source, such as a gift from a friend or relative, the owner could claim an exemption of $500.00 for cash plus up to $1,325.00 as a wildcard personal property exemption assuming they didn't need to use to shield other property. This would leave $1,175.00 as non-exempt cash. You would then deduct $293.75, which is the fee a Chapter 7 Trustee would be paid from these funds to administer a Chapter 7 case, and that leaves $881.25 which would have to be paid to unsecured creditors through the Chapter 13 Plan.
In the above-example, the cash would not be taken from the Debtor when they filed their Chapter 13 Case but would, instead, be paid by the Debtor as part of the monthly Plan payment they make to the Trustee. In is, nevertheless, usually advantageous to limit your cash to the amount of the exemptions to which you are entitled. Otherwise, it could significantly increase the amount you have to pay back to your unsecured creditors and, in turn, significantly increase the amount of your monthly Chapter 13 Plan payment.
If you are suffering with financial problems, please call (513) 528-0200 or send an email to Info@CincinnatiBankruptcy.com. You can also contact us with through our website by clicking here.
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