What is Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy generally discharges all of your unsecured debt. Most common forms of unsecured debt are credit cards and medical bills. Under certain circumstances, Chapter 7 Bankruptcy can discharge other debts, such as old IRS delinquent taxes. There may be some situations where secured debt, such as a wholly unsecured second mortgage, can also be eliminated. Each person can file a new Chapter 7 Bankruptcy case every 8 years and eliminate most of their unsecured debt.
Filing Chapter 7 Bankruptcy cannot remove some unsecured debts. Child support obligations cannot be eliminated by bankruptcy.
Based on reports from our clients, lenders are offering new credit within just two years of filing bankruptcy.
Creditors Stop Calling
Once you file a Chapter 7 Bankruptcy case, all creditors must immediately cease all communication. They cannot attempt to collect a debt until the bankruptcy court orders otherwise. This is often referred to as the "automatic stay." If creditors contact you during the automatic stay, they will be in violation of the law. They could potentially be penalized in some situations.
Should You File a Chapter 7 Case?
When debt mounds up and you feel there is no escape, Chapter 7 Bankruptcy could be an option. In many instances, you can wipe out your personal debt and keep creditors away. We have helped many people successfully discharge their debt. If you are considering filing Chapter 7 Bankruptcy, it is important to contact our firm to discuss your options. Your initial consultation is always Free.
In order to qualify for Chapter 7 Bankruptcy, you must pass a "Means Test." The Federal Government determines the median income of the population each year. Guidelines are set for each State on an annual basis. Individuals filing a Chapter 7 Bankruptcy case must show income below the median income amount. In 2015, the Florida median income was $42,036 for one person. The median income for a family size of two was $51,584. A family size of three had a median income of $57,052. The median income for a family size of four was $66,461. Don't worry if your gross income is above these limits.
Having Higher Income
In some cases, you can have a much higher income. You might still qualify for a Chapter 7 Bankruptcy filing, depending on certain deductions. Contact our office to find out if you qualify for a Chapter 7 Bankruptcy. We can provide you with straightforward answers, and an evaluation of your particular financial situation.
Under the Florida Constitution, your personal home enjoys homestead protection from creditors. This means that creditors cannot take your home. They cannot place a lien on your home or take your home, unless they hold a mortgage on it. If a lender takes your home as a result of a foreclosure action, filing Chapter 7 Bankruptcy will help you avoid any deficiency.
What you Need to Know
Our government has bankruptcy laws to protect you! Knowing the law is power. It is important to have an experienced bankruptcy attorney on your side. If you have an unmanageable debt-load, it may be time to face financial facts. Chapter 7 Bankruptcy could give you the financial footing you need for a fresh start. It will STOP creditor harassment, garnishments, lawsuits, foreclosure, repossessions, and tax levies. Contact our office for FREE information.
Bankruptcy Means Test: Determining if you qualify for a Chapter 7 Bankruptcy
The Means Test evaluates whether your monthly income (from all sources) is within the range of the applicable median income. Current Monthly Income (CMI) is calculated by averaging the monthly gross income received for a six month period prior to filing Chapter 7 Bankruptcy. CMI includes gross income from all sources. This includes income of a non-filing spouse, regular gifts or assistance from family members, and gross income from a wholly-owned business. CMI does not include Social Security income.
Presumption of Abuse
Failing the means test means there is a “presumption of abuse” and you cannot file a Chapter 7 Bankruptcy. You may be able to overcome that presumption, if special circumstances call for an adjustment to your income or expenses. Some examples of possible “special circumstances” are job loss or pay cut, a serious medical condition, or unusually high child care expenses. To qualify as a special circumstance, you will have to show that your expenses are reasonable and that you have no reasonable alternative. Judges have discretion to determine whether special circumstances exist and allow the filing of a bankruptcy.
When is Chapter 7 Bankruptcy Appropriate?
Chapter 7 bankruptcy is designed for the liquidation of debts. Certain property is exempt, and you retain it. In addition to preserving exempt property, the individual debtor seeks a discharge of most debts.
The court could require you to liquidate nonexempt assets. Proceeds from the sale of nonexempt assets are distributed to your unsecured creditors, as partial satisfaction of the debts you owe. The court discharges any remaining unpaid debt (with some exceptions). You are not responsible for discharged debt. You can only file under Chapter 7 Bankruptcy, if you pass the Means test.
Mandatory Credit Counseling and Debtor Educational Courses:
Florida bankruptcy law requires Chapter 7 Bankruptcy filers to complete pre-bankruptcy credit counseling and pre-discharge debtor education from an approved nonprofit credit counseling agency.
You are not required to complete credit counseling, if one of the following applies to your situation:
Incapacity, where the person is so impaired by reason of mental illness or deficiency that the individual is incapable of making rational decisions.
Disability, where the person is so physically impaired that the individual is unable, after reasonable effort, to participate in an in person telephone or internet briefing session.
Active military duty in a military combat zone.
You must file a separate motion, if you want the court to grant you this type of exemption. The U.S. Trustee must approve Credit counseling organizations and debtor education course providers to issue certificates. The agency usually faxes or e-mails the certificate to our office for filing. Most clients complete this course over the phone or on the Internet.
How Will Chapter 7 Bankruptcy Affect My Credit Score?
In most instances, the score improves over a short period of time. Typically, our clients report that they were able to rebuild their credit within 2 years after discharge of a Chapter 7 Bankruptcy. Creditors know you have little or no remaining debt after a bankruptcy discharge, and will not be eligible to file another Chapter 7 Bankruptcy case for 8 years. Therefore, creditors consider those coming out of a Chapter 7 Bankruptcy discharge as a "good risk" and are willing to extend new credit. We suggest that you use a reputable credit reporting agency to view your score prior to filing, and also continue to monitor your score afterwards.
Can Chapter 7 Bankruptcy Stop Foreclosure of My Home?
Chapter 7 Bankruptcy will stop a foreclosure, as long as there are no prior bankruptcy filings that might restrict another filing against the property. If you have previously filed bankruptcy, we can evaluate your unique case. Chapter 7 Bankruptcy can temporarily stop a foreclosure action. In some rare cases, it will not.