Personal Bankruptcy Chapter 7
Also known as a straight or liquidation bankruptcy, a Chapter 7 personal bankruptcy is a kind of bankruptcy that can clear away several different kinds of unsecured debts.
If you are pretty far behind on paying your bills and are financially unable to afford your living expenses and monthly expenses, then filing your Chapter 7 bankruptcy with a Chapter 7 bankruptcy attorney in Florida can be your last resort to help you settle your finances. But you should keep in mind that you might need to give up some belongings, and filing a bankruptcy will probably have a long-lasting negative effect on your credit.
How does Chapter 7 bankruptcy with a Chapter 7 bankruptcy attorney in Florida work?
The court puts an automatic temporary stay on your current debts when you file for Chapter 7 personal bankruptcy with a Chapter 7 bankruptcy attorney in Florida. This automatic temporary stay keeps creditors from garnishing your wages, collecting payments, repossessing property, foreclosing on your home, turning off your utilities or evicting you. The court will then legally possess your property and select a bankruptcy trustee to oversee your bankruptcy case.
The role of the trustee is to review your assets and finances and oversee your Chapter 7 bankruptcy case. The trustee will sell specific property that the bankruptcy won’t let you keep, known as nonexempt property, and use the proceeds of the sale to pay back your creditors. They will also arrange and run a meeting between you and your creditors, known as a creditor meeting. During this meeting, you go to the courthouse and answer questions about your bankruptcy filing.
The list of exempt property that you don’t need to sell or turn over to creditors, as well as the total money value that you can exempt from your bankruptcy case, can vary depending on the state. Some states allow you to choose between the federal exemptions and their exemption list. However, most Chapter 7 bankruptcy cases are “no asset” cases, which means that all of your property is exempt or there is a valid lien against your property.
At the end of the Chapter 7 bankruptcy process, about four to six months after your initial filing, the bankruptcy court will discharge your remaining debts, which means that you no longer need to pay them back. That being said, there are some debts that are not dischargeable through bankruptcy, including alimony, court fees, child support, most student loans, and some tax debts.
The difference between a Chapter 13 and Chapter 7 bankruptcy
Chapter 7 and Chapter 13 bankruptcy are the two most common kinds of bankruptcy that impact customers. Either of these types of bankruptcy can help when you are unable to pay your bills, but there are several huge differences between Chapter 7 and Chapter 13 bankruptcy.
A Chapter 7 bankruptcy can wipe out specific debts within a matter of months, but a trustee appointed by the court can sell your nonexempt property to pay back your creditors. You also need to have a low income in order to qualify for a Chapter 7 bankruptcy.
A Chapter 13 bankruptcy enables you to keep all of your stuff and get on an affordable repayment plan to pay back your creditors. You need to have enough money in order to afford the creditors’ payments, and you also need to stay below the maximum total debt limits, which are currently about $400,000 for unsecured debts and over $1 million for secured debts.
A court will approve the Chapter 13 repayment plan, and this plan typically lasts about three to five years. Your trustee will collect all of your payments and send them to your creditors. After you finish the repayment plan, the rest of the unsecured debts are discharged.
Who qualifies for Chapter 7 bankruptcy?
It’s important to keep in mind that there are a few requirements you have to meet in order to qualify for a Chapter 7 bankruptcy:
- You typically need to finish a group or individual credit counseling class from an approved credit counseling agency within six months before filing for bankruptcy.
- Your average monthly income over the past six months should be less than the median income of the same-sized household in your state or you need to pass a means test, which figures out if your disposable income is high enough to make partial payments to unsecured creditors. You might still be allowed to file a Chapter 13 bankruptcy if you don’t pass the means test.
- You are not eligible if you have filed a Chapter 7 bankruptcy over the past eight years or a Chapter 13 bankruptcy over the past six years.
- You need to wait at least 181 days before trying again if you attempted to file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy and your case was dismissed.
- A court can dismiss your bankruptcy case if it figures out that you are attempting to defraud your creditors. If you use credit cards or take out a loan with the intent of declaring bankruptcy to avoid repaying your debt, then the court can dismiss the case.
What debts are discharged in a Chapter 7 bankruptcy?
A Chapter 7 bankruptcy will typically discharge your unsecured debts, including unsecured personal loans, medical bills, and credit card debt. The bankruptcy court will discharge these debts at the end of the bankruptcy process, typically about four to six months after you begin.
There are some kinds of unsecured debts that aren’t discharged through a Chapter 7 bankruptcy, including alimony, student loans, child support, some tax debts, court fees and penalties, homeowners association fees, unsecured debts that you intentionally left off your filing, and personal injury debts you owe because of an accident while you were intoxicated. Your credit can also keep specific debts from being discharged.
Also, a Chapter 7 bankruptcy can discharge the debt that you owe on secured loans. Secured loans are loans that are backed by collateral, including your home for a mortgage. But if the debt is discharged, the creditor has the right to repossess or foreclose on your property.
What do you lose and what can you keep in a Chapter 7 bankruptcy?
If you file for a Chapter 7 bankruptcy, you might lose your nonexempt property, property that has a lien on it, and property that you provided as collateral for a loan.
Some examples of exempt property based on the current individual federal limits include up to $4,000 on a car, up to $1,700 in jewelry, up to $13,400 in personal property, like clothing, books, and household items, a homestead exemption of $25,150, up to $2,525 in books and tools of trade, specific insurance benefits, alimony and child support, public benefits like Social Security, unemployment, and veterans benefits, and funds in tax-exempt retirement accounts like 401(k) or 403(b) accounts and up to $1,362,800 in combined savings in IRAs and Roth IRAs.
Another important aspect to all of this: No matter how bad your previous or current situation is, you can still rebuild your credit after a Chapter 7.
How long does filing a Chapter 7 bankruptcy take?
The entire Chapter 7 bankruptcy process typically takes about four to six months from the initial credit counseling to the point when the court discharges the rest of your debts. Your bankruptcy can take longer if, for example, the trustee asks you to submit extra documents or if they need to sell your property in order to repay your creditors.
That’s why we recommend speaking to a Chapter 7 bankruptcy attorney in Florida like the Van Horn Law Group to learn more about filing a Chapter 7 bankruptcy.
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