Consumer Chapter 7 Bankruptcy
Consumer Chapter 7 Bankruptcy
If you have fallen behind on credit cards, medical bills and other personal debts, or if you have experienced a repossession or foreclosure, please give me a call. A Chapter 7 bankruptcy may help you get a fresh start in your financial affairs and may eliminate credit card debt, medical bills and other debts; stop lawsuits and allow you a fresh start financially. Call me to see if you qualify for a Chapter 7 bankruptcy. If you do not, there may be other options available that I can explain to you. Although you will find some information here about a Chapter 7 bankruptcy, it is by no means meant to be a thorough explanation of all the things you need to consider in filing a Chapter 7 bankruptcy.
First of all, if you are reading this, you are likely an individual or a married couple. This means that there are, for the most part, two chapters of bankruptcy relief available to you: Chapter 7 and Chapter 13. In the most basic terms, a Chapter 7 bankruptcy is a discharge or elimination of certain debts, while a Chapter 13 is a repayment plan.
A Chapter 7 bankruptcy can be filed by an individual or a married couple, a partnership, a corporation or other business entity. However, I only handle Chapter 7 bankruptcy filings for individuals or married couples and only address Chapter 7 bankruptcy as it relates to individuals or married couples. To qualify for relief under Chapter 7 of the US Bankruptcy Code, a debtor cannot file bankruptcy if, during the preceding 180 days a prior bankruptcy petition was dismissed due the debtor’s willful failure to comply with orders of the court, or if the petition was otherwise voluntarily dismissed. Also, the debtor must have, within 180 days before filing, received credit counseling from an approved credit counseling agency, in addition to other requirements. Chapter 7 bankruptcy can be filed against personal or “consumer” debts such as: credit cards, medical bills, unpaid utilities, and personal loans, or it can be filed due to a failed business. The former (non-business or “consumer” bankruptcy) is the more common filing and is the kind of bankruptcy I exclusively practice.
In seeking to file a Chapter 7 bankruptcy, your goal may be to discharge or eliminate certain of your debts. But, what kind of debts can you discharge in a Chapter 7 bankruptcy? Some examples of debts that are generally dischargeable are: credit cards, medical bills, unpaid utilities and personal loans. In general, debts such as: alimony, child support, fraudulent debts, certain taxes, student loans and certain other debts incurred within a specified time period before your bankruptcy is filed, cannot be discharged in a Chapter 7 bankruptcy.
So how can you do this? Federal bankruptcy law allows an individual to file a Chapter 7 bankruptcy for personal or consumer debt if you pass the “means test” and therefore qualify to file if all other requirements are also met. So what is this “means test”? The easiest way to look at it is this: Is your income low enough that you can’t pay back your debt under a plan structured to meet the requirements of federal bankruptcy law. Now, in reality, it isn’t that simple. The means test is very specific and can be very complicated if your household income is above a certain amount. In Florida, if your income is below the legal income amount a year for an individual or below the legal income amount a year for a married couple, then you can automatically pass the means test without having to actually “take” the test. Married couples may file petitions for bankruptcy jointly or individually. Married individuals must gather the income information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse are required so that the court, the bankruptcy trustee, and creditors can evaluate the household’s financial position. If your household income is above the legal amounts, then you may want to consider the possibility of filing a Chapter 13 bankruptcy, instead of a Chapter 7 bankruptcy, if the means test cannot be met.
If you qualify for a Chapter 7 bankruptcy and are seeking to discharge your dischargeable debts, you also have to agree that the Federal government, through a bankruptcy trustee, can take your non-exempt property. Under the Federal bankruptcy laws, you may keep your exempt property. More specifically, Chapter 7 bankruptcy is a liquidation where the bankruptcy trustee collects all of your non-exempt assets and sells any such assets to pay your creditors. The net proceeds of the liquidation are then distributed to your creditors with a commission taken by the bankruptcy trustee overseeing the distribution. So what property is exempt in Florida? The short version, though not all inclusive, is this: Your homestead (where you live, provided certain requirements are met), up to $1,000.00 in personal property per individual and up to $1,000.00 in value of a vehicle. If you do not use your homestead exemption, because you either do not own a home or you do not wish to keep your home, you can instead choose to use a $4,000.00 “wildcard” exemption to apply to your property. Depending on your situation, the filing of bankruptcy under Chapter 7 may result in a loss of property.
You may keep paying certain secured debts, such as a car loan or a furniture loan or a loan for your house, by reaffirming those debts. To do so, you must sign a voluntary “reaffirmation agreement”. If you decide that you want to keep your house, or your car, or your furniture and you reaffirm the debt, you cannot bankrupt that debt again for eight years after the date of filing a Chapter 7 bankruptcy in which the debtor was granted a discharge. You will still owe that debt and you must continue to pay it just as you were obligated to pay it before you filed bankruptcy. In order to reaffirm the debt, you must also bring it current. In other words, if, for example, you are several months behind, then you must pay the past due payments in order to reaffirm the loan. You can select which debts you may want to reaffirm by stating that you intend to keep the house and the furniture, but that you want the car to go back, to the respective creditor for example.
Of course, there are a lot of other issues to discuss before you can file a bankruptcy. Don’t try to handle this very complicated procedure on your own. Call me today at 407-518-7674 for a free half hour consultation to discuss your specific situation.
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The law office of Patricia L. Daugherty is also a debt relief agency. Ms. Daugherty helps people file for bankruptcy relief under the bankruptcy code.
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