Chapter 7 Bankruptcy

In the State of Florida, there are two primary types of bankruptcy that individuals seek shelter under. They are Chapter 7 and Chapter 13. Depending on your income, debts, assets, and desired outcome you may be able to choose which chapter to file under. However, there are requirements that must be met in order to qualify for each bankruptcy and in most cases if these requirements are not met you will be ineligible to file under that particular chapter.

When bankruptcy laws were changed in 2005, there was a lot of concern that people would not be able to file for a Chapter 7 bankruptcy in Florida. If you ask a Boca Raton bankruptcy lawyer what percentage of their Florida bankruptcy filings are Chapter 7, you will quickly learn that not only is Chapter 7 bankruptcy still an option — it is close to 70% of all consumer bankruptcies filed in the state.

The first step is to determine if you qualify for Chapter 7 bankruptcy. If the majority of your debt is non-consumer in nature, you automatically qualify for Chapter 7 bankruptcy. If the majority of your debt is consumer debt then you have to pass a means test. This is a simple mathematical formula that looks at your income against that of the state’s median income for an equivalent sized household. If your income is lower than the state’s median income you are eligible to file for Chapter 7. If your gross income is above that of the state’s median income you will be allowed to compute your net income using specific allowable expenses. If at this point your net income is still above that of the state, you will more than likely need to file for bankruptcy using Chapter 13.

After Qualifying for a Chapter 7 Bankruptcy in Florida

A Florida Chapter 7 bankruptcy is often referred to as a liquidation bankruptcy. This is because you will be required to hand over your assets that are not exempt. Understanding what assets are exempt from your bankruptcy is a vital part of the process. Even though bankruptcy is a Federal Law that is practiced in Federal Court, each state has its own unique rules and exemption allowances. Your Boca Raton bankruptcy lawyer will be invaluable in reviewing your assets and helping you determine which assets are exempt and will not become part of your bankruptcy estate. Florida has some of the most liberal exemption allowances causing many Chapter 7 bankruptcies to become asset-free. This means that the debtor will not have to hand over any of their assets to complete the bankruptcy.

When a person is facing financial hardship and looking to bankruptcy for help, it is a virtual certainty that they are being harassed non-stop by creditors. As soon as you file your bankruptcy petition an automatic stay is issued. This court order tells all creditors to halt all collection efforts. This includes any attempt to foreclose on a person’s home, garnish their wages, file any lawsuit, or even call you. If a creditor takes any action after your bankruptcy has been filed, you need to inform your attorney right away.

As soon as you file your bankruptcy petition with the Clerk of Courts you will be assigned a bankruptcy trustee. It is the trustee’s job to ensure that all of your paperwork is submitted properly. The trustee will head up your 341 meeting. This is also called the meeting of the creditors. They along with your creditors will be able to ask you any questions that relate to your financial situation, your debts, and any possible change in your financial status in the near future. The trustee will also be charged with the job of representing your unsecured creditors, collecting and selling any nonexempt assets, and the payment of your creditors with those proceeds. As long as you have been forthright and honest there is nothing to fear during your 341 meeting.

Within a few months of your 341 meeting the Bankruptcy Court will hold your discharge hearing. It is at this hearing that your allowable debts are discharged and become legally uncollectable. There are some debts that cannot be discharged in a Chapter 7 bankruptcy. Some of the more common debts that are not dischargeable are student loans, certain tax debts, child support, and alimony.

I will reiterate, once the Bankruptcy Court discharges your debts they become legally uncollectable. If a creditor attempts to seek collection on a discharged debt, they could be in violation of the Fair Debt Collection Act and you need to call your Boca Raton bankruptcy attorney right away to halt their actions. Your creditors will abide by the law and your fresh financial start can begin as smoothly as possible.