A bankruptcy filing under Chapter 7 is commonly referred to as "straight" bankruptcy or "liquidation." It offers a "fresh start" by wiping out most of your credit card and unsecured debt. One of the provisions under Chapter 7 is that you must turn over to the Trustee any property that you cannot claim as exempt under the bankruptcy laws. The Trustee then sells that property and distributes the proceeds equally among your creditors.

The filing of a bankruptcy petition creates what we call a "bankruptcy estate." The estate technically becomes the temporary legal owner of all the debtor's property.

The bankruptcy trustee can legally take any property you own that has resale value and liquidate it to raise money to pay your creditors. However, they can only sell your personal assets that aren't protected by Florida's exemption law. In practice, very few people that are eligible to file under Chapter 7 have assets that aren't exempt (protected from being sold).

Automatic Stay

In most situations, immediately upon filing a Chapter 7 bankruptcy, an automatic stay is created by the filing of the petition and is the first legal protection bestowed upon the debtor. It protects filers from any and all collection efforts, including telephone calls, letters, home foreclosure, collection lawsuits, auto repossession, and garnishment.

Means Test - Am I eligible for Chapter 7?

Chapter 7 is not available for everyone. To qualify for a Chapter 7 bankruptcy, you must pass a qualifying test that is referred to as the "means test" The test involves a comparison of your family's income to the median income of a similar family in Florida. Depending on the results of the means test, further calculations may be necessary to determine if you are eligible to file a Chapter 7 bankruptcy.

Exemptions

Florida has opted out of the federal bankruptcy exemptions and apply Florida exemption law in Chapter 7 bankruptcy cases. Individual debtors are entitled to keep certain assets free from the claims of creditors under Florida's exemption law (Florida Statute 222).

If you have owned your home for more than 40 months, Florida's homestead allows you to keep your house.

If you have owned it for less than 40 months, then the exemption available under the homestead exemption is limited to $125,000 per spouse. Florida law also allows unlimited exemptions for your 401K , social security benefits, supplemental security income, pension plans, workers compensation, and prepaid college tuition accounts.

Bankruptcy Discharge

A discharge in a bankruptcy means that a debtor's obligations are erased or wiped out. A debtor receives a discharge for most of his or her unsecured debts in a Chapter 7 bankruptcy case. Once a debt is discharged, a creditor may no longer initiate or continue any legal action to collect the debt.

Although the court grants a discharge in the majority of Chapter 7 bankruptcy filings, the court may deny a discharge if it finds that:

• the debtor didn't keep or produce acceptable financial records
• the debtor failed to satisfactorily explain any loss or transfer of assets
• the debtor committed perjury in the course of the bankruptcy filing
• the debtor didn't comply with a lawful order given by the bankruptcy court
• the debtor transferred, hid or destroyed any property that would have otherwise become a part of the bankruptcy estate
• the debtor did not complete the mandatory credit counseling or financial management courses by an agency approved by the court

Reaffirmation

Secured debts such as car loans are generally not separated from the asset that secures them. For example, if you want your car loan discharged, you will have to give the car back to the creditor. However, if you want to keep the car (or any other property that is securing a debt), you must negotiate a reaffirmation agreement with the creditor. Reaffirming a debt means that you will continue making the payments for the right to keep the property.

BENEFITS OF A CHAPTER 7 BANKRUPTCY

Chapter 7 bankruptcy gives you a "fresh start" in a matter of months.

Choosing to file a Chapter 7 bankruptcy is not an easy decision and one that should not be taken lightly. However, it also provides the change to receive protection against creditor harassment and regain control of your financial life by starting anew. A typical case takes approximately 4 months from start to finish and after your case is closed, you can begin to rebuild your credit.

With Chapter 7 Bankruptcy, you will be able to keep what you need to start over.

Although not all property is exempt, in most cases you will be able to keep your house, furniture, clothes, tools, cars, and jewelry. Florida's generous exemption laws will help shield a large majority of the average family's assets that qualify for a Chapter 7 bankruptcy. The Bankruptcy Law Firm of Orfelia M. Mayor, P.A. can advise you of ways to keep the things you need.

A Chapter 7 Bankruptcy will allow you to continue paying secured debt and keep the property.

A secured debt is one where the creditor has a lien or security interest in the property that was financed. Car loans and mortgages are the most common examples of secured debt. In most cases, you can reaffirm the debt and continue paying without losing the property.

Minimal Appearances in Court

Most people are intimidated by the thought of having to appear in court. In a Chapter 7 Bankruptcy, there is only one mandatory meeting called a "341 meeting" in front of your trustee and any creditors that show up for the meeting. No one will be allowed to harass or intimidate you and you will be treated with respect and dignity at all times. It's a quick meeting that usually last ten to fifteen minutes. An attorney from the Bankruptcy Law Firm of Orfelia M. Mayor, P.A. will be with you at all times during this meeting representing your interests to the court.

A Chapter 7 Bankruptcy will excuse most of your debts

Most of your debts will be discharged in a Chapter 7 Bankruptcy, however, some debts are not dischargeable. The most common types of non-dischargeable debts are:

• Federal tax debt that is less than 3 years old (other conditions apply)
• Alimony
• Child Support
• Student Loans
• Debts entered into under the pretense of fraud, embezzlement or intentional injury
• Certain government fines and penalties
• Debts arising from driving under the influence of drugs or alcohol
• Creditors not listed in the bankruptcy case or otherwise not notified about the case

This list is somewhat simplified so make sure that you consult with a bankruptcy attorney to fully evaluate your circumstances.  If you'd like a free consultation with a bankruptcy lawyer, call our Davie office today!  We are located close to Hollywood, Plantation, Cooper City, Pembroke Pines, Fort Lauderdale, Miramar and Sunrise.