What is Chapter 7 Bankruptcy and How Do I File a Chapter 7 Case in Daytona?
Late notices, harassing telephone calls, debt collection lawsuits, and threatening letters can be overwhelming and frightening. If you are dealing with debt problems, you may feel as if there is no way out of your situation. You have tried everything to catch up on your bills, but nothing seems to work. It is important that you know two things:
• You are not alone; and,
• There is a way out of debt you can afford.
Our Daytona bankruptcy attorney helps individuals and couples who are struggling to pay their bills find an affordable way out of debt. There are many people just like you who are trying to pay their bills,but there is not enough money each month to pay living expenses and debts. We want you to know there is help for debt problems.
If you want to explore bankruptcy options for getting out of debt, call (888) 316-2131 to schedule a free bankruptcy consultation with a Florida bankruptcy lawyer. Stop creditor harassment and eliminate debt with a Chapter 7 bankruptcy case.
What is a Chapter 7 Bankruptcy Filing?
Some people are nervous about filing a Chapter 7 bankruptcy because cases under Chapter 7 are referred to as “liquidation” bankruptcies. Liquidation refers to the duty of a Chapter 7 trustee to sell the debtor's nonexempt property to pay unsecured creditors. Therefore, the “liquidation” reference frightens people because they assume they will lose all their property if they file under this chapter of bankruptcy.
While it is true that a case under Chapter 7 could result in the loss of property, the majority of Chapter 7 cases in Florida are no-asset cases. In a no-asset Chapter 7 case, the debtor keeps all his property while getting rid of all or most of his unsecured debts without paying any money toward those debts. When you consider that most Chapter 7 cases are completed within four to six months after the filing date, Chapter 7 can be a quick way to get rid of debt.
How Do I Protect My Property If I File Chapter 7?
When you file for bankruptcy relief, you can claim bankruptcy exemptions in certain assets. The Bankruptcy Code contains a list of exemptions; however, states can opt out of the federal exemptions. Florida has chosen to opt out of the federal exemptions in favor of state-defined bankruptcy exemptions. Debtors benefit from using Florida bankruptcy exemptions because Florida has some of the most generous exemptions in bankruptcy in the country.
For example, a homeowner can exempt all the equity in his home if the property meets the requirements for a homestead exemption. Therefore, a debtor in Chapter 7 does not need to worry about losing his home if the home meets all requirements for a homestead exemption, regardless of the amount of equity he has in the home at the time of filing. Debtors in some states must worry about losing their home because the exemptions are not as generous as the bankruptcy exemptions in Florida.
In addition to your home, you can claim exemptions in other property. Our Daytona bankruptcy lawyer carefully analyzes your assets to determine if any of your property may be at risk if you file under Chapter 7. Some debtors voluntarily choose to let a piece of property go that has a little bit of equity because they can get rid of tens of thousands of dollars in unsecured debt without paying any money toward those debts.
Eliminating Debt in a Chapter 7 Bankruptcy Case
In a Chapter 13 case, the debtor must pay back a portion of the debts he owes to his unsecured creditors. However, in a Chapter 7 case, you can eliminate most or all your unsecured debt without paying anything to the creditors. In other words, you get rid of the debt in about six months without paying any money to a trustee. If the bankruptcy exemptions protect the equity in all your property, you also keep your property.
However, there are three very important aspects of Chapter 7 that you should understand before filing for bankruptcy relief.
• Number 1: Not all debts are eligible for a discharge.
Some unsecured debts are not eligible for a discharge regardless of the chapter of bankruptcy you file. Student loans, alimony, child support, and most debts owed to the government, including taxes, cannot be discharged.
Therefore, you continue to owe these debts after the bankruptcy case is complete. In some cases, a debtor can discharge old income taxes in a Chapter 7, but you need a Florida bankruptcy attorney to review the taxes to determine if they are eligible for a discharge.
• Number 2: Secured liens are not canceled by Chapter 7.
A lien on property is not released under Chapter 7, even though your legal liability for the actual debt could be discharged. For example, if you want to keep your vehicle, you must continue paying the loan payments. If you do not pay your car payments, the creditor can apply to the court to repossess the vehicle or wait until after the case is closed to repossess the car.
However, if you want to surrender your vehicle to the creditor, the debt is satisfied in full. In other words, if the creditor sells your car, but does not get enough money to pay the balance owed on the account in full, you do not owe any of that money. The remaining balance owed on the car loan is discharged at the end of your case.
• Number 3: You must meet the income qualifications to file Chapter 7.
To prevent people from committing fraud by filing Chapter 7 when they have money to pay their creditors, the Bankruptcy Code now requires debtors to meet income requirements to file under Chapter 7. The Chapter 7 Means Test compares the median income for your area to your average monthly income. If your average income exceeds the median income, you may not be permitted to receive a discharge under Chapter 7.
However, there is a second section of the means test. The test allows you to deduct certain amounts for living expenses to determine your disposable income. Disposable income is the amount of money you have left over after paying allowable living expenses. If the amount of your disposable income is sufficient to fund a Chapter 13 plan, you are not eligible for a bankruptcy discharge under Chapter 7.
Determining if Chapter 7 is the Right Choice for You
Deciding whether to file under Chapter 7 is a serious decision. You must consider whether any of your property could be at risk and whether you qualify under the income requirements. An experienced Daytona bankruptcy lawyer can review your case to advise if Chapter 7 is the best option for you to get out of debt.
Filing a Chapter 7 bankruptcy case to get rid of debt is a great option for many people because it is quick, and you may not have to pay back any of your debt. However, you want to work with an experienced Florida bankruptcy lawyer to avoid any mistakes that could cause you to lose property or have your bankruptcy discharged denied.
Our bankruptcy law firm helps clients throughout Volusia County. For a free bankruptcy consultation, call (888) 316-2131.v