Oklahoma Bankruptcy Exemptions and Law
COVID-19 Update: Oklahoma's bankruptcy courts are open, for the most part, as the coronavirus pandemic stretches on. Although the clerk's offices are usually closed, dropboxes are normally available. Pro se debtors who do not have a lawyer may also file documents and make payments by mail. Judges and trustees (people who oversee bankruptcy cases for judges) usually conduct hearings and 341 meetings by telephone or videoconferencing. Live interaction might be available in a few cases. Other coronavirus restrictions, such as masking, social distancing, and symptom checking, apply as well. Click here for more information from the court.
Why Bankruptcy Helps
In Oklahoma, many debt collectors do not need court orders to seize your house, garnish your wages, and take other adverse action. Some recent Supreme Court decisions have given debt collectors even more power in this area. Therefore, if you are behind on payments, you never get a chance to tell your side of the story, at least in most cases.
Most people do not fall behind because they ignore their responsibilities. Rather, disasters like job loss, serious illness, or divorce make it impossible to keep up with high installment payments. Most creditors may take adverse action after just one missed monthly payment.
An Oklahoma bankruptcy lawyer does much more than empower you to tell your side of the story. An attorney can help you stop adverse actions, protect your assets, and give you a fresh financial start.
A combination of federal and state laws brings about the aforementioned fresh start. These laws are the Bankruptcy Code, which controls general bankruptcy procedure, and Oklahoma's Homestead Exemption and General Exemption laws.
As mentioned, Oklahoma creditors have almost unlimited power when it comes to debt collection. Bankruptcy's automatic stay is usually the only way to stop these actions. Section 362 of the Bankruptcy Code immediately halts adverse actions like:
- Wage garnishment
- Bank account levy
In fact, the automatic stay prohibits creditors from communicating with debtors. Since Section 362 violations carry such harsh penalties, out of an abundance of caution, some creditors stop mailing statements and suspend ACH payment arrangements. If these things happen, you still have an obligation to make payments on secured debts. Your lawyer can help you with the details.
Depending on the type of bankruptcy you file, the automatic stay remains in effect for up to five years. The automatic stay puts everything on pause.
Debt discharge gives your family a fresh start. Discharge, which is the elimination of the legal responsibility to pay a debt, usually applies to unsecured obligations, such as:
- Revolving credit accounts
- Medical bills
- SBA loans
- Credit cards
- Payday loans
Priority unsecured debts, mostly child support, student loans, spousal support, criminal fines, and back taxes, are only dischargeable in certain situations. Even if the debt is nondischargeable, the Automatic Stay still applies.
Types of Consumer Bankruptcy
If your family is struggling with unsecured debts, like the ones discussed above, Chapter 7 is usually a good option. This form of bankruptcy eliminates these debts in as little as six months.
You also have the power to reaffirm certain debts if you choose. Assume Peggy owes considerable money to a doctor that she wants to keep seeing. Once the automatic stay expires, the doctor will probably cut ties with Peggy unless she makes payment arrangements. An attorney can also negotiate to reduce fees with creditors, like Peggy's doctor.
Families who struggle with secured debt delinquency usually file Chapter 13. These debtors get up to five years to gradually erase delinquency over time.
The trustee basically puts these families on an allowance for the entire protected repayment period. After they pay basic expenses, their disposable income funds a monthly debt consolidation payment. As long as the payment meets the minimum legal requirements, creditors normally cannot successfully object to it. The automatic stay remains in full force and effect.
The answer to this question is almost always “yes." Most people qualify for one or both types of consumer bankruptcy. A bankruptcy lawyer can clearly lay out your legal options and explain the pros and cons of each one.
Written Eligibility Rules
Some requirements apply to all debtors. All filers must cooperate with the trustee. They must produce requested documents, attend scheduled meetings, and timely make required payments. Furthermore, all debtors must complete a debt counseling class before they file. They must also complete a budgeting class after they file.
Furthermore, each chapter has its own requirements. Chapter 7 filers must qualify under the means test. Their yearly incomes must be below average for that family size in that geographic area. As of November 1, 2020, that amount is $78,458 for a family of four. Some geographic variations could apply. Living expenses in the Oklahoma City/Tulsa area are much higher than they are in other parts of the state.
Chapter 13 debtors must have under $1.3 million in secured obligations and under $400,000 in unsecured obligations. These totals include current and past-due accounts. Unless you recently bought Wayne Manor, these limits are usually not a problem.
Bankruptcy's informal qualifications, which vary in different jurisdictions, usually relate to the informal statements that filers make.
When you file Chapter 7 bankruptcy, you are essentially telling the court, “I cannot pay my debts, so take all my nonexempt assets to pay my debts." As outlined below, most people do not have nonexempt assets.
Reaffirmation agreements are sometimes an issue in this area. Almost all debtors reaffirm (voluntarily agree to repay) some unsecured debts, mostly things like cable TV contracts. However, some people reaffirm a number of agreements, even things like credit cards. In these cases, trustees often question the need to file Chapter 7. To many trustees, it does not seem like these individuals have crushing debt.
The income/expense balance in Schedules I and J could be a concern as well. If you are in the black every month, the trustee might ask similar questions. You might not have anything to hide, but no one likes uncomfortable questions.
Chapter 13 has the opposite informal qualification. These debtors essentially say "I cannot pay my debts all at once, so I need a payment plan." So, as mentioned above, these debtors must have enough disposable income to fund a debt consolidation payment. This payment must be large enough to pay all allowed claims, mostly secured debt arrearage, before the protected repayment period ends. So, this payment is usually about the size of a car payment, or even larger.
The Sooner State has both formal and informal property exemptions. A bankruptcy lawyer can maximize these exemptions and protect more of your property.
If you have lived in Oklahoma for at least two years prior to filing, you may take advantage of the state's generous property exemptions.
- Homestead exemption: Many states limit the homestead exemption by value. Acreage is the only limit in Oklahoma. Your home is completely protected if it's on less than one acre in the city or 160 acres in the country.
- Motor vehicle exemption: Owners may protect up to $7,500 in vehicle equity. If you have less equity, the trustee cannot touch it. Since these loans are amortized (interest first), most owners have almost no equity in new cars. Used cars typically have little financial value, so the equity percentage is largely irrelevant.
- Pension plans: No matter how much money they contain, earned IRAs, 401(k)s, and other retirement accounts are completely exempt. Defined benefit plans, like teacher retirement plans, are also completely exempt.
- Public benefits: Many people depend heavily on Social Security, VA disability, and other government benefits. These benefits are technically exempt in bankruptcy. A lawyer can show you how to fully protect this money. Life insurance benefits are exempt as well.
- Personal property: Pets, livestock, clothing, electronics, furniture, jewelry, and other household goods are exempt. A dollar limit applies in some categories. However, most personal items have very little cash value.
- Current wages: Debtors may keep up to 75% of the wages they earned in the three months before they filed. Judges often grant hardships that allow debtors to retain even more of this money.
Some states allow debtors to choose federal exemptions instead of state exemptions. Oklahoma is not one of these states.
The bankruptcy trustee owns nonexempt property. It becomes part of the bankruptcy estate. So, to seize nonexempt property, the trustee must first file a motion for turnover. This motion gives an attorney a chance to stop liquidation before it starts.
Trustees often target cash, like money in a savings account, for seizure. If the money is gone when the trustee files a motion, and it often is, the mootness doctrine sometimes applies. Keep in mind, however, that large transfers from savings and checking accounts just prior to filing for bankruptcy can be viewed with suspicion. Check with your lawyer prior to making any large transfers or purchases when considering bankruptcy.
Here is an example of how the moot doctrine works: Assume Bobby and Joseph each claim ownership of a house. The matter goes to court. Just before the judge hears the case, the house burns down. Now, it does not matter who owned the house, because the house is gone. The point is moot, and a court cannot consider it.
How do I start bankruptcy in Oklahoma?
Since money is usually tight when people file bankruptcy, many debtors consider do-it-yourself (DIY) filings. The forms are available here.
However, filing forms is only part of a consumer bankruptcy. For example, debtors must cooperate with trustees. Failure to cooperate could mean case dismissal. A bankruptcy lawyer can anticipate trustee requests, so you are not blindsided by unusual queries.
A Bankruptcy Petition Preparer (BPP) bankruptcy could be an alternative as well. Because they are not lawyers, BPPs charge much less than attorneys. You get what you pay for, however. BPPs can only fill out forms, they cannot answer your questions, give you legal advice, and stand up for you in court.
Where do I file bankruptcy in Oklahoma?
There are three federal district courts in the Sooner State. If you live in Oklahoma City, or to the north, west, or south of it, you are probably in the Western District. If you live in or around Tulsa, you are probably in the Northern District. If you live anywhere else in Oklahoma, you are most likely in the Eastern District.
DIY and BPP filers must conduct most or all of their business at the physical court locations. Attorneys usually have unlimited access to the state's ECF (Electronic Case Filing) system. Lawyers may file documents, pay fees, and do other things remotely.
How much does bankruptcy cost in Oklahoma?
Bankruptcy filing fees, which vary in different jurisdictions and for different types of bankruptcy, are usually around $350. Payment plans and fee waivers are occasionally available. Legal fees also vary in different areas and in different kinds of bankruptcy. Payment plans are almost always available. Chapter 13 debtors normally include these fees in the monthly debt consolidation payment. Sliding scales are almost always available as well.
How do I declare bankruptcy in Oklahoma?
Bankruptcy debtors must file a petition and schedules. These documents list all your assets and the reasons they are exempt. Bankruptcy debtors must also fully cooperate with the trustee and timely pay all required fees.
How much debt do you have to have before declaring bankruptcy?
Most moneylenders have very little patience in this area. They quickly resort to foreclosure, wage garnishment, and other extreme measures. So, if you are more than one month behind on a secured debt, you should consider filing bankruptcy. As for the debt load, most financial planners say your total debt payment, including secured and unsecured obligations, should not exceed 36% of your monthly income.
What is the difference between Chapter 7 and Chapter 13 bankruptcies?
Chapter 7 quickly discharges unsecured debt, like medical bills and credit cards. Chapter 13 gives families up to five years to gradually catch up on mortgage payments and erase other secured debt delinquency.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.