Chapter 7 Bankruptcy
Chapter 7 Bankruptcy offers those who are overwhelmed with debt a chance to start over. Once the bankruptcy process completes, which lasts 3-4 months, all eligible debts are forgiven or "discharged" - meaning that the filer won't have to pay these debts.
Also, immediately after filing for Chapter 7 Bankruptcy, all creditor collection attempts must cease, including wage garnishment, car repossession, and home foreclosure proceedings.
A bankruptcy attorney typically examines his or her client's entire financial situation, including all assets, debt-to-income ratio, and equity in a home or car, before advising on whether or not Chapter 7 Bankruptcy is the right choice for the client.
Debts Discharged with Chapter 7 Bankruptcy
Chapter 7 Bankruptcy results in the following types of debt being discharged completely:
- credit card debt,
- medical bills,
- civil judgements,
- deficiencies owed because of foreclosure,
- personal loans.
For many filers, the discharging of these debts is sufficient to eliminate all debts.
Debts Ineligible for Chapter 7 Bankruptcy
Some debts cannot be discharged with Chapter 7 Bankruptcy, including:
- child support,
- divorce-related debts owed to an ex-spouse,
- student loans,
- federal and state taxes.
Also, recent debts within 6 months of filing for bankruptcy may not be discharged, such as credit card purchases for luxury items.
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Eligibility to File Chapter 7
There are several eligibility requirements to file Chapter 7 Bankruptcy, which pertain to the filer's income, living expenses, and debts.
If a filer earns more money that the average same-size household in Florida does, for example, he or she may have to take a "means test" to determine if Chapter 13 Bankruptcy would be a fairer solution for the creditors involved.
A bankruptcy attorney can advise on which type of bankruptcy is better for the consumer, and explain the eligibility requirements.
Florida Bankruptcy Exemptions
Florida law allows various "exemptions" - items that can be protected from creditors when filing bankruptcy. The Florida Exemptions include:
- any personal property up to $1,000,
- motor vehicle up to $1,000,
- wages up to $750 per week.
Protecting Your Home and Car
Florida law allows a generous homestead exemption: a filer can protect an unlimited amount of value in a home, as long as the property is not larger than 160 acres.
For cars, up to $1,000 of equity is exempt under Florida's Bankruptcy exemptions.
Also, the act of filing for Chapter 7 Bankruptcy immediately puts a stop to any car repossession or home foreclosure efforts while the Bankruptcy Court determines how the debts will be handled.