CHAPTER 7 BANKRUPTCY (KNOWN AS LIQUIDATION OR "FRESH START")
Chapter 7 is by far the most popular and recommended type of bankruptcy. About 70% of all bankruptcies are filed under Ch. 7 of the Bankruptcy Code.
Millions of Americans have found debt relief using this type of bankruptcy. Ch. 7 affords you the opportunity to eliminate your unsecured debt like credit cards, medical bills, repos, lease termination fees, and taxes while allowing you to keep all of your exempt assets like your home, car, and personal household items.
The attorneys and staff at The Stohlman Law Firm, LLC have the knowledge and expertise to guide you through the bankruptcy process without any complications. We appreciate that you are considering entrusting us with one of the most personal and important matters of your life. We pledge that you will be treated with the highest level of respect and integrity throughout your entire case, and we will do everything in our power to ensure that you are satisfied with our services.
HOW DOES CHAPTER 7 BANKRUPTCY WORK?
Once we file your case, creditors may no longer contact you, and all pending lawsuits or wage garnishments must stop immediately. In addition, all your old debts, like credit cards bills, medical expenses, past repossessions, and lease termination fees, may be totally eliminated. Best of all, in most cases, you may be entitled to keep all of your exempt assets like your home, car, and household items.
Imagine being able to wake up tomorrow with no debt and still keep all the personal things that are important to you. Plus, your credit can be re-established to a favorable rating in just two years or less.
About a month after your case is filed, you will be required to attend a meeting with a trustee assigned to your case. This is a court-appointed individual whose job is to go over the information we filed in the court concerning your finances. This meeting is not adversarial. There is no judge involved and the meeting is not conducted in a courtroom, but rather in a big meeting room. In most cases, the meeting will be conducted in just 10-15 minutes. We will prepare you in advance for the questions you will be asked by the trustee and, of course, we will accompany you at the meeting.
OUR LAW FIRM MAKES THE PROCESS AS EASY AS IT SOUNDS
Sounds too easy? With the experience of filing more than 15,000 cases, the Tampa Chapter 7 attorneys and staff at The Stohlman Law Firm, LLC have the ability to guide you through the process without any complications. Our fees range from $1,250 to $1,500 or more depending on the complexity of your case. You can retain our services and setup an easy payment plan.
QUALIFYING FOR CHAPTER 7
BANKRUPTCY QUALIFYCATIONS FOR CHAPTER 7 IN FLORIDA
When changes to existing laws happened in 2005, it left many people confused and worried about getting relief from debt. In fact, this fear of being denied has kept many people from filing for bankruptcy in the first place, despite facing serious financial challenges. If you are struggling against debt and would like more information about bankruptcy, we invite you to speak with one of our experienced attorneys. At The Stohlman Law Firm, LLC our lawyers and staff have the knowledge and expertise to guide you through the bankruptcy process without any complications. We have handled over 50,000 bankruptcy cases and can help you easily understand whether you qualify for Ch. 7 bankruptcy.
FACTORS IN DETERMINING BANRUPTCY QUALIFICATIONS
There are two key factors that we examine to determine whether you qualify for a Ch. 7: Income and Assets.
If your income is less than the median income, then you probably qualify for a Ch. 7 bankruptcy. The median income is established by the federal government and will vary depending on the number of people in your household.
Even if your household income exceeds the median income as set forth by the federal government, you may still qualify for a Ch. 7 bankruptcy under the second analysis called the means test. The means test is just a fancy way of describing a budget analysis. In other words, we do an in-depth analysis of your budget which includes your actual income and certain expenses as allowed by the bankruptcy court. Certain income such as wages, pension, and 1099 income is included in the analysis, while other income such as social security and child support payments are not. Also, certain actual expenses are included, such as your mortgage and car payments, but other expenses are limited by standardized amounts established by the federal government. In other words, we can only deduct standardized amounts for food, transportation, educational expenses, etc. even though these deductions may be less than what you actually spend. The means test is a complicated legal analysis and only a competent, experienced bankruptcy attorney should provide you with advice on how to calculate the means test. Failure to properly prepare the means test may result in you being disqualified from Chapter 7.
For a more detailed explanation of the Means Test read more by clicking here The Bankruptcy Means Test.
Assuming you are under the median income, or otherwise qualify for a Ch. 7 under the means test, we must then evaluate whether your assets will be protected if we file a Ch. 7 bankruptcy. In Florida, under most circumstances any equity in your homestead is exempt, as well as certain retirement plans and annuities. Personal property, including your car, household items such as your clothing, furniture, jewelry, etc., are protected or exempt in a Ch. 7 but the amounts you get to keep is limited depending on your certain circumstances. Only an experienced bankruptcy attorney can provide you with advice on whether your assets are protected and how to maximize your exemptions.
Property Exemptions in Florida
Insight from Our Chapter 7 Bankruptcy Lawyers
The property you are permitted to keep in Chapter 7 bankruptcy is called your “exempt” property. Federal bankruptcy law allows each state to use either the Federal List of Exemptions or use the state’s own list of exemptions. Florida, like 37 other states, has elected to use its own exemption laws and “opted out” of the federal scheme. As a result, the list of exemptions available in Florida is different from those of every other state. To qualify for exemptions, you must have lived in Florida continuously for at least 24 months before your bankruptcy is filed. Our attorneys can work with you to ensure that you understand your situation and options fully!
Chapter 7 is not the only option
While Ch. 7 is a great option, not to mention the most commonly used option, it is not the only option. If filing Ch. 7 bankruptcy is not possible in your situation, you may be able to file Ch. 13. In some cases, even if you qualify for Ch. 7, you may want to file Ch. 13 simply because of your unique circumstances and your goals. No matter what your situation is, our experienced attorneys will help you determine which path you qualify for and which path is right for you.
Is Chapter 7 Bankruptcy the Right Choice for You?Determine if Chapter 7 bankruptcy is a good option for you.
Before you file for Chapter 7 bankruptcy, you’ll want to decide if it makes financial sense. You can determine if Chapter 7 bankruptcy is right for you by asking yourself the following questions:
- Are you judgment proof—that is, are creditors legally barred from taking your property or income even if you don’t file for Chapter 7 bankruptcy?
- Will Chapter 7 bankruptcy discharge enough of your debt to make it worth your while?
- Will you have to give up property you want to keep?
Do You Have Wages or Valuable Property?
A creditor will take the time to determine whether you have assets before taking steps to collect from you. If you don’t have an income stream or property other than basic household items and a modest car—and you the situation isn’t likely to change—you’re judgment proof. A creditor will be unable to collect from you, so it’s unlikely that filing for bankruptcy will be necessary.
The same is true if all of your income comes from Social Security (which can’t be taken by creditors), and all of your property is exempt (your state’s exemption laws protect certain property from creditors—more on this below).
If you do have valuable assets, you can expect your creditors to take action. You can count on collections for taxes, child support, and student loans occurring quite quickly because the law allows creditors special collection rights. Other unsecured creditors—such as those with credit card balances, medical debt, utility balances, and the like—must first sue you in court and obtain a court judgment before they can start collection procedures, such as a wage garnishment or seizure of personal property.
If a creditor serves you with a lawsuit, you’ll want to speak with a bankruptcy attorney as soon as possible. Filing a bankruptcy case before the creditor receives a judgment will help avoid liens being placed on your property (liens don’t always go away in bankruptcy, thereby giving the creditor a permanent right to your assets). Even if the creditor already has a judgment against you, however, filing for bankruptcy can often provide needed relief.
Will Chapter 7 Bankruptcy Discharge Enough Debt?
Certain categories of debt aren’t dischargeable in Chapter 7 bankruptcy. It doesn’t make much sense to file for Chapter 7 bankruptcy if your primary goal is to eliminate these nondischargeable debts. The main non-dischargeable debts are:
- back child support and alimony obligations
- student loans, unless repayment would cause you undue hardship
- income taxes less than three years past due
- recent debts for luxuries, and
- court judgments for injuries or death to someone arising from your intoxicated driving.
The bankruptcy judge might find that some types of debts are nondischargeable if the creditor objects to a discharge in the bankruptcy court. These debts include:
- debts incurred by fraud, such as lying on a credit application or writing a bad check
- debts from willful or malicious injury to another or another’s property
- debts from larceny (theft), breach of trust, or embezzlement, or
- debts arising out of a marital settlement agreement or divorce decree that aren’t otherwise automatically nondischargeable as support or alimony.
If the bulk of your indebtedness is from debts that creditors might object to being discharged, you won’t want to move forward with your case without speaking with a knowledgeable bankruptcy attorney. Being accused of any type of fraud in bankruptcy can come with serious consequences.
How Much Property Will You Have to Give Up?
Whether or not you decide to file for Chapter 7 bankruptcy might depend on what property of yours will be taken to pay your creditors (“nonexempt” property) and what property you get to keep (“exempt” property).
Certain kinds of property are exempt in almost every state, while others are almost never exempt. The following are items you can typically keep (exempt property):
- motor vehicles, up to a certain value
- reasonably necessary clothing (no mink coats)
- reasonably needed household furnishings and goods (the second TV might have to go)
- household appliances
- jewelry, up to a certain value
- personal effects
- life insurance (cash or loan value, or the proceeds of life insurance), up to a certain value
- part of the equity in your home
- tools of your trade or profession, up to a certain value
- a portion of unpaid but earned wages, and
- public benefits (welfare, Social Security, unemployment compensation) accumulated in a bank account.
Items you must typically give up (nonexempt property) include:
- expensive musical instruments (unless you’re a professional musician)
- stamp, coin, and other collections
- family heirlooms
- cash, bank accounts, stocks, bonds, and other investments
- a second car or truck, and
- a second or vacation home.
What Is a Chapter 7 Asset Case?
If money is available to pay debt, the bankruptcy court will instruct creditors to submit documentation (an official proof of claim form) that verifies the amount owed by the filer.
Is the case an asset case? When you file a Chapter 7 case, you must disclose all of the property you own on forms called schedules. You must also identify the things that you can keep (exempt) under your state’s exemption laws. If you can exempt all of your property, nothing will be available for creditors, and the court will label your case a “no-asset case.” By contrast, your case will be an asset case if you own more property than you can protect in bankruptcy.
What happens to property in an asset case? You’ll keep your exempt property. The bankruptcy trustee—the official tasked with managing your case—will sell the remaining property, called “nonexempt property,” for the benefit of your creditors. After the deadline to submit a proof of claim form passes, the trustee will distribute the funds according to a priority ranking system. Debts that rank higher in priority get paid in full before lower priority debts. For instance, domestic support obligations and taxes rank higher than credit card balances and student loans.
Filing an asset case can make sense. It’s unusual for an individual to have an asset case because most cash-strapped people sell valuable items to pay for living expenses. By the time they’re ready for bankruptcy, there’s nothing left. A filer might choose to file an asset case if the dischargeable debt (the amount that will go away) is significantly greater than the value of the nonexempt property. The scales might tip even further if the debtor faces a wage garnishment or lawsuit, or if the debtor owes a priority debt that won’t get discharged in bankruptcy. In the latter case, the sales proceeds will get applied to the debt, thereby taking some of the sting out of losing the nonexempt property.
Example. Jon owes $60,000 in credit card debt and $40,000 in unpaid taxes. He also owns a sailboat worth $15,000. Even though he will lose the boat, he decides to file for Chapter 7 bankruptcy. He knows that because his taxes are his highest priority debt, all of the money from the boat sale will go toward paying down his nondischargeable tax debt, while all of the credit card debt will get wiped out. Therefore, even though Jon stands to lose property, he’ll be in a better financial position afterward because instead of being in the red by $85,000 ($100,000 debt – $15,000 boat value = $85,000), he’ll reduce his total debt down to a $25,000 in nondischargeable tax debt.
Cosigners in Chapter 7 Bankruptcy
If someone is also responsible for one of your debts—for instance, a relative cosigned on a car loan or your business partner is equally liable for a debt—that person will still be on the hook if you file for Chapter 7 bankruptcy. The bankruptcy case wipes out the obligation of the filing debtor only. So if the debt is of a type that you can discharge in Chapter 7 bankruptcy, you will no longer be legally responsible for paying it, but the other person obligated to pay the debt will.