What is Chapter 7 Bankruptcy?

Chapter 7, is also known as a “Liquidation Bankruptcy”.

In a Chapter 7 proceeding, the Debtor can discharge all of his/her unsecured debts, while secured debt such as an auto loan or home mortgage remains unchanged. A Trustee is appointed to collect non-exempt or unprotected assets, sell them and distribute the net proceeds to creditors. Exemptions in Florida include your primary residence and most retirement accounts.

There are many benefits to filing for Chapter 7. It allows you to walk away from your debt and gives you a fresh start. The process is fast, there are no monthly payments required and unsecured debts are wiped out after the process is complete. Chapter 7 ends any attempts at credit collection. As soon as your chapter 7 case is filed, your creditors no longer call you, harass you or bring a lawsuit against you.

You can qualify to file for Chapter 7 bankruptcy by passing the means test. The means test reviews all aspects of your income to make sure that you do not exceed the income guidelines based on your state’s median family income. It is possible to qualify for a Chapter 7 even if your income is above the median family income for your household size, but that is determined on a case by case basis.

A chapter 7 discharge will help eliminate credit cards, medical bills, car repossession debt and even some IRS debt.

Call 954.424.3600 to speak with a bankruptcy attorney.

Chapter 7 Bankruptcy FAQ

What is the difference between a Chapter 7 and Chapter 13?
Chapter 7 is a liquidation bankruptcy. A trustee is appointed and can sell your non exempt assets for the benefit of your creditors. Chapter 13 is a reorganization. It can be used to save your home from foreclosure. Your payment to the court is based on your income, expenses and your non exempt assets.

What is a 341 Meeting of Creditors?
At the meeting the trustee will question you about assets, income and issues that may arise after the review of your bankruptcy schedules, tax returns and bank statements. Due to the duration and nature of the meeting, it is very unlikely that any creditors will attend.

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Chapter 7 Frequently Asked Questions

What is the difference between a Chapter 7 and Chapter 13?
Chapter 7 is a liquidation bankruptcy. A trustee is appointed and can sell your non exempt assets for the benefit of your creditors. Chapter 13 is a reorganization. It can be used to save your home from foreclosure. Your payment to the court is based on your income, expenses and your non exempt assets.

What is a 341 Meeting of Creditors?
At the meeting the trustee will question you about assets, income and issues that may arise after the review of your bankruptcy schedules, tax returns and bank statements. Due to the duration and nature of the meeting, it is very unlikely that any creditors will attend.

How will a Chapter 7 bankruptcy affect my credit?
A Chapter 7 bankruptcy will remain on your credit report for 10 years. Notwithstanding the length of time that the bankruptcy stays on your credit report, many people find that they are able to obtain new credit including automobile loans and low money down FHA mortgages during the time that the bankruptcy is still being reported on their credit report.

Can I transfer assets to someone else before I file a bankruptcy?
Transferring assets to friends or family members prior to the bankruptcy is a terrible idea. Your bankruptcy schedules require you to disclose transfers, the trustee will ask about transfers at the 341 meeting, the trustee can attempt to undo transfers considered to be fraudulent. If a trustee finds out about a transfer that you did not disclose, it can lead to the denial of your bankruptcy discharge.

What is the Mean Test?
The Means Test is used to determine if you qualify for a Chapter 7. It takes into account your family size, household income and expenses to determine if you have disposable income available to pay towards your debts. If you fail to pass the Means Test you may be unable to file a Chapter 7, but still may be able to file Chapter 13. The amount of your disposable income is used to determine the amount of your monthly payment in a Chapter 13 reorganization.

What are exempt assets?
Bankruptcy exemptions are designed to protect a certain amount of your assets in a Chapter 7 bankruptcy. Exemptions also help in determining how much certain creditors will get paid through your bankruptcy plan if you file a Chapter 13 bankruptcy. If you can “exempt” assets in bankruptcy it means that the Chapter 7 trustee cannot take it and sell it to pay your creditors.

Will I lose my house if I file a Chapter 7 in Florida?
Florida has the “Homestead Exemption” which means that 100% of the equity in your home is considered untouchable by your creditors or a federal bankruptcy trustee. There are some exceptions, for example the exemption does not apply to secured creditors such as a mortgage company or association.

Can my Chapter 7 be denied?
It is possible to have your bankruptcy denied, but such denials are reasonably easy to avoid. If you are accurate to the best of your ability when you answer the questions asked on the bankruptcy forms and questions asked by the trustee you should have no issues.

Does a Chapter 7 help if my house is in foreclosure?
Chapter 7 will delay a foreclosure and wipe the possible deficiency claim of the mortgage company if you want to sell it at a short sale or let it be foreclosed. A Chapter 7 will not force the bank to modify your mortgage; you will need a Chapter 13 for that.