Filing for Bankruptcy Under Chapter 7

Wed, Jun 1, 2011


chapter 7 bankruptcy floridaWhen you’re faced with insurmountable debt and see no wait, you do have a few options. With the help of a Florida Bankruptcy Lawyer, you can file under chapter 7. Chapter 7 is a little bit different from Chapter 13, but not by much. In the Chapter 7 law, you must file bankruptcy under the state where you have been a resident for the past 2 years. Any debt that was accrued before those two years would be filed in accordance with that state’s laws, and not Florida’s.

When filing for bankruptcy there are two different kinds of property, or debt. This would be exempt or non-exempt property. Each state has its own laws about which assets are exempt and which are not.

One example of exempt property is your homestead. Under the Florida Constitution, your homestead cannot be revoked from you when you file for bankruptcy, up to $137,000. A married couple filing jointly may claim two homestead exemptions totaling $274,000 in protection. Other exempt properties are 401K plans, retirement plans, Social Security income, disability income, cash value of a life insurance plan, health savings accounts, and hurricane savings accounts.

There is an Automobile Exemption which equals to $1000 of equity. If you file jointly with your spouse, you may exempt $2,000 of equity. The value of your car is determined by the yellow NADA book price, with adjustments for your car’s condition. If you loan is larger than the equity you can claim, you will be considered to be “upside down” in your loan and may keep your car if you make regular car payments on it.

You can exempt other property such as furniture, appliances, clothes, tools, and other personal property up to $1,000 or $2,000 if filing jointly. If you do not own a home or if you do not claim a Homestead Exemption, you may qualify to exempt up to $4,000 in personal property, joint debtors may claim up to $8,000 in a wildcard exemption. A Florida bankruptcy lawyer would be able to advise which course of action would be best in this situation.

Under the Chapter 7 Bankruptcy Florida law there are several items of non-exempt property. This property will be taken by the Trustee and sold to pay the unsecured creditors. You may enter a “buy-back” agreement with the Trustee to purchase these items back. This would be anything that was bought under credit but has not been paid back. Things such as furniture, appliances, clothes, tools, and other things bought with a “store” credit card that is still owed, would be non-exempt property to be sold. Anything that is not in the “exempt” list is considered non-exempt.

When filing for bankruptcy under the Chapter 7 law, the law requires you to receive credit counseling  and financial education. This would be administered by approved providers. Your bankruptcy filing will not be complete until your counseling and education is complete. You will have to pay for this, but the prices are regulated and are usually under $50. You do have to pass two tests to qualify for a chapter 7 bankruptcy filing. The first test is a means test. This test takes your yearly earnings, amounts owed, and other factors, and uses them in an equation to determine whether or not the debt could be paid back with debt consolidation or through a Chapter 13 filing.

If you pass the means test, the next test to pass is called a “good faith” or “abuse” test. This test will determine whether or not the Chapter 7 filing was done in bad faith, or in abuse of the system. This test is not applicable to filers that are under the median income, nor is it applicable to debtors above the median income whose debts are non-consumer debts, such as business  debts and taxes. Filing for a chapter 7 bankruptcy can be a long and difficult process, but having a Florida bankruptcy attorney on your side can make the process smoother and more efficient. There is hope for those that have seemingly no way out from under their debt.


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