Know More Chapter 7 Bankruptcy and Debunk Some Myths
Chapter 7 bankruptcy in Florida is a crucial financial tool for individuals facing overwhelming debt burdens. Brandon, a suburban community in the Tampa Bay area, follows the federal guidelines of Chapter 7 bankruptcy. That offers residents an opportunity for a fresh start.
This form of bankruptcy involves liquidating non-exempt assets to settle outstanding debts, focusing on relieving debtors who cannot manage their financial obligations.
Individuals must navigate specific eligibility criteria and understand the state’s unique exemptions to ensure a smooth bankruptcy process.
Short Summary:
- Chapter 7 bankruptcy is a strong choice for resolving serious debt. It provides a quick process (three to six months) and discharges most qualifying debts. However, limitations exist, such as exclusions for certain debts and potential impacts on credit and public records.
- Some common myths about Chapter 7 bankruptcy are misconceptions about losing everything, instant debt-free status, credit ruin, spousal filing requirements, and limitations on filing frequency.
- The Chapter 7 filing process starts assessing eligibility and exemptions to preparing petitions, automatic stays, trustee assignments, potential objections, adversary claims, and the ultimate discharge.
What is Chapter 7 Bankruptcy in Florida?
Chapter 7 bankruptcy, also called “straight” or “liquidation” bankruptcy, aims to provide individuals or businesses facing financial difficulties a fresh start by wiping out most of their unsecured debts, such as credit card debt and medical bills.
Below are some crucial points about Chapter 7 bankruptcy in Florida:
- Rebuilding credit: It takes one to two years to get new loans. You might get credit cards sooner than that.
- Keeping cash: You can keep $1,000 or $4,000 if you don’t claim a homestead exemption.
- Filing time: It takes around six months, including paperwork, meetings, and discharge.
What are the Advantages and Disadvantages of Chapter 7 Bankruptcy?
We discuss the benefits and drawbacks of Chapter 7 bankruptcy to help you weigh the pros and cons before making informed decisions about your financial situation.
The Pros of Filing for Chapter 7
Bankruptcy doesn’t mean you’re broke. It just means that your debts are more than your assets. In this type of bankruptcy, you sell some assets (like a second home or extra vehicle) to pay off debts, but you can usually keep your main home, one vehicle, and some insurance policies.
Discharge Most of Your Debts
Chapter 7 bankruptcy allows you to eliminate a significant part of your debts. Once qualified, you will not be pursued by creditors because of the automatic stay. You also won’t be obligated to repay certain debts.
Quick Process
If you qualify for this type of bankruptcy, the process is relatively fast, taking only a few months to complete. That is much quicker compared to other bankruptcy chapters.
Freedom from Future Obligations
After your assets are sold, creditors cannot touch your income or demand more money. The income you earn after your case is concluded remains yours and is not used to settle any outstanding debts.
The Cons of Chapter 7 Bankruptcy
While this type of bankruptcy has benefits, it may not suit everyone. Chapter 13 bankruptcy might be better, depending on your situation. Here are some drawbacks to choosing liquidation bankruptcy in Florida:
Only for Individuals
This type of bankruptcy is only for individuals and couples, not for businesses. Sometimes, even spouses may need to file separately.
Not All Debts Discharged
Certain debts, such as child support, some student loans, post-bankruptcy debts, criminal fines, and most taxes, are not eliminated by Chapter 7. Co-signers might still be responsible for loans.
Potential Means Test Failure
To qualify, you must pass a means test, considering factors like dependents and transportation expenses. Failing the test might lead you to file for Chapter 13 bankruptcy.
Public Record
Once resolved, the bankruptcy becomes public information. That can be accessed by potential employers, investors, partners, and others. It can affect your future business opportunities and loan approvals.
What are the Five Myths About Chapter 7 Bankruptcy in Florida You Need to Bust Now?
We debunk five common myths surrounding Chapter 7 bankruptcy in Florida to clarify and dispel misconceptions about the process.
Myth 1: I Will Lose Everything
Contrary to the belief that filing for this type of bankruptcy in Florida means losing everything, there are exemptions to protect certain assets. You can keep most belongings through these exemptions, while some items may be sold to settle debts.
Myth 2: I Will Be Debt-Free After Filing
Filing for this chapter doesn’t wipe away all debts. Particular obligations, like student loans, tax debts, and divorce-related payments, still need to be paid. It’s crucial to understand that liquidation bankruptcy doesn’t eliminate all types of debts.
Myth 3: My Credit Will Be Ruined Forever
Although filing for this chapter affects your credit, it’s not a permanent stain. With responsible financial practices, you can start rebuilding your credit shortly, often within a year or less.
Myth 4: Both Spouses Have to File
Whether both spouses need to file for this chapter depends on the nature of their debts and asset ownership. If only one spouse files, only their debts are discharged, leaving the other spouse responsible. That can help preserve one spouse’s credit.
Myth 5: I Can Only File for Bankruptcy Once
You can file for Chapter 7 bankruptcy again after eight years. However, qualifying for Chapter 13 takes even less time. While it’s an option, it’s not always the best solution.
How Can I File for Chapter 7 in Florida?
Below is the process of filing for liquidation bankruptcy in Florida:
- Decide if bankruptcy is the right choice: Assess all your assets and debts to see if this type of bankruptcy solves your financial challenges.
- Review applicable exemptions: Determine which property might be exempt and not included in the bankruptcy estate. You might need legal guidance with this.
- Prepare the bankruptcy petition: Include all necessary details about your debts, income, and assets in the petition.
- Automatic stay: The automatic stay, also known as a “suggestion of bankruptcy,” halts all collection efforts while the bankruptcy process is ongoing. Mortgage creditors and other unsecured creditors may seek relief to foreclose on secured property.
- Assignment to a Chapter 7 trustee: Your bankruptcy case is assigned to a trustee. A meeting is also scheduled with you, your attorney, and the trustee.
- Exemption objections: The bankruptcy trustee can raise objections to any exemptions claimed in the bankruptcy petition.
- Adversary claims: A trustee or creditor might file an adversary claim if a debt is believed to be excluded from discharge or if there’s suspicion of abuse in the bankruptcy process.
- Bankruptcy discharge: Non-exempt assets are sold by the bankruptcy trustee. The proceeds are then distributed to creditors. Lastly, the bankruptcy court discharges eligible debts.
What are Other Concerns About Chapter 7 Bankruptcy?
We explore additional considerations and potential concerns related to Chapter 7 bankruptcy below:
Keeping Your Car
In this chapter, you can keep your car through redemption. That means you can buy your car from the creditor at its current market value, which can be financially beneficial if it’s worth less than what you owe on the loan. That helps you get the car at a discount and keep ownership.
Executory Contracts
An executory contract is an agreement where both parties have obligations to receive a benefit, like a car lease. Chapter 7 allows you, or the trustee, to decide whether to keep or reject these contracts.
With a car lease, rejecting an executory contract means giving the car back with no further liability. If you choose to keep it, you need to make payments. The leasing company can also take back the car if you miss payments.
It’s important to note that assuming the contract isn’t the same as reaffirming it. The leasing company cannot sue you for the remaining payments if you default.
Student Loans
In Chapter 7 bankruptcy, student loans usually cannot be cleared unless the debtor proves “undue hardship.” The debtor must file a separate request with the bankruptcy court to get a student loan discharged based on hardship. Demonstrating undue hardship can be challenging unless the debtor is physically unable to work.
To determine hardship, most bankruptcy courts follow the Brunner test. This test requires you to show that:
- You can’t maintain a basic standard of living while paying off your student loans.
- Your situation is likely to remain difficult for a long time.
- You’ve made genuine attempts to repay your loans.
Call Our Firm to Guide You Through Chapter 7 Bankruptcy in Florida!
Feeling overwhelmed by crippling debt? Considering Chapter 7 bankruptcy but worried about losing everything? You’re not alone. Florida’s bankruptcy laws can be confusing, leaving you in a sea of paperwork and uncertainty. But there’s hope!
The Golden Law Group, your trusted Brandon bankruptcy lawyers,, can help you navigate the complexity of bankruptcy with:
- Compassionate Guidance: Our attorneys will patiently explain your options and tailor a strategy based on your unique situation.
- Experience You Can Trust: We know the ins and outs of Florida bankruptcy law and how to maximize your exemptions.
- Streamlined Process: We handle all the complexities, from paperwork to court appearances. That can help you focus on rebuilding your financial future.
Remember, you have options. Take control of your finances and start fresh with The Golden Law Group. Call us now to schedule your free consultation!
