Filing for Chapter 7 Bankruptcy is usually the perfect action if you’re drowning in debt and at your wits’ end trying to come up with a solution. Oftentimes, Chapter 7 Bankruptcy is the most promising option. Florida Bankruptcy Chapter 7 Attorney can help you (in most cases) in providing a new financial start, permanently eliminate the debts you can’t pay, put you on a track to improving your credit score and allow you to keep assets including your home and car.
Some of the best things about Chapter 7 Bankruptcy, however, are what it stops bank levies, creditor/debt collector harassment, evictions, foreclosures, lawsuits, public benefit overpayments collections, repossessions, tax collection (depends on type of tax), utility disconnections and wage garnishments.
These are the facts: Filing for Chapter 7 Bankruptcy often allows individuals to eliminate their debt without sacrificing any of their most important assets. That includes repossessions, personal loans, medical bills, and credit card bills. Wage garnishments can end, judgment liens can be removed, and bank levies can be recovered! That means no more harassment or worries about being evicted, having your wages garnished, seeing your utilities cut off, or other negative consequences of overwhelming debt.
Liquidation under Chapter 7
A debtor is permitted to claim certain property of the estate as exempt from liquidation proceedings. However, the debtor’s nonexempt assets are collected by a trustee representing the creditors. The trustee liquidates the assets and distributes the proceeds to the creditors. The debtor is then discharged from most debts. The term discharge basically means that the debt is deemed to be satisfied. Liquidation under Chapter 7 can be instituted voluntarily by the debtor, or he can be forced into Chapter 7 liquidation by creditors. This would be involuntary bankruptcy.
After the filing of the bankruptcy petition, the debtor needs protection from the collection efforts of its creditors. Therefore, the bankruptcy law provides that the filing of either a voluntary or involuntary petition operates as an automatic stay which prevents creditors from taking action against the debtor. This is similar to an injunction against the creditors of the debtor. The automatic stay ends when the bankruptcy case is closed or dismissed or when the debtor is granted a discharge.
The trustee in bankruptcy can be elected by the creditors. A trustee will be appointed by the court if a trustee is not elected by the creditors. The trustee automatically “owns” all of the nonexempt property of the debtor and also property inherited by the debtor within six months after the filing of the petition.
The U.S. Bankruptcy Code allows the debtor to keep certain of his property and claim it as being exempt from the claims of creditors. This is known as exempt property. Generally, the debtor has a choice of exempt property as described under Florida State law or exempt property as described under the Federal Bankruptcy law. The debtor will of course choose the law which is most favorable. Some general exemptions under federal law involve the following, with some being exempt up to a statutory dollar amount:
- Interest (equity) in a residence;
- Household furnishings;
- Payments under a life insurance policy;
- Payments of alimony and child support; and
- Awards from personal injury actions.
The decree of the bankruptcy court which terminates the bankruptcy proceedings is generally a discharge that releases the debtor from most debts. However, a discharge does not release a debtor from certain debts. For example, the following types of debts are not dischargeable: taxes; student loans; loans obtained by use of a false financial statement; alimony and child support; debts not listed on the schedule of liabilities; liability for willful and malicious injury to property; judgments based upon driving while intoxicated; and certain consumer debts for luxury goods.
Chapter 7 v. Chapter 13
Chapter 7 Liquidation Plan and Chapter 13 Reorganization Plan provide two different types of protection for debtors and their escalating debts. Both these bankruptcy provisions provide the debtor with an opportunity for a fresh start with the help of a Florida Bankruptcy Chapter 7 Attorney. There are so many factors that influence in determining whether Chapter 7 Liquidation Plan or Chapter 13 Reorganization Plan is more appropriate for a debtor.
The major influencing factors are:
- Debts Discharge: There are 17 types of debts that are not dischargeable under Chapter 7. Under Chapter 13, debts for child support, maintenance, or alimony; debts for death or personal injury related to intoxicated driving, debts for criminal fines and compensation, certain debts for student loans, debts not included in the plan, and installment debts maturing after the expiry of the plan are not dischargeable. In certain circumstances, some substantial debts are not dischargeable under Chapter 7 and the debtor can prefer Chapter 13 for such debts. Similarly, if a debtor filed a Chapter 7 discharge and s/he was not eligible for such an order for the last six years, such a debtor can opt Chapter 13 discharge.
- Retaining the Secured Property: In Chapter 13, the debtor has a right to retain the real property on a secured debt (in a default) such as a home mortgage or an automotive lien over a reasonable period of time. During the repayment plan of that secured property, the creditors are not permitted to initiate any foreclosure or collection effort. In Chapter 7 liquidation process, the curing of defaults in a secured debt is not possible. However, under Chapter 7 the actual debtor is allowed to convert or schedule liens against a number of exempt personal property.
- Retaining Non-exempt Assets: In Chapter 7, the debtor has no right to retain any non-exempt real assets and s/he has to turn all such properties to the trustee. However, Chapter 13 permits the debtor to retain all non-exempt property with him/her if major payments are made to the unsecured creditors. Therefore, most debtors who own a good deal of assets prefer Chapter 13 as it permits to hold large equity with him/her.
- Debtor’s Revenue: Chapter 13 plan demands regular monthly income for a debtor in default to make up his/her repayment plan. If a debtor is unemployed or devoid of any regular income, a Chapter 13 repayment plan is not practical. In contrast, if a debtor has sufficient means or revenue to repay his/her major portion of debts within a reasonable period of time and plea for Chapter 7 liquidation, the court may dismiss such cases on the basis of abuse of Chapter 7.
- Debtor’s Attitude: Chapter 13 entertains debtors with genuine and practical desire to repay all or most of his/her unsecured debts; whereas Chapter 7 entertains the debtors who wish to repay only one or two debts.
- Time and Expense: Generally, Chapter 13 repayment plans are meant to discharge in 36 to 60 months; whereas Chapter 7 liquidation plan finishes and discharge in around three to six months. Chapter 13 involved additional expenses such as attorney’s fees and administration expenses than Chapter 7 cases. If a debtor is unable or unwilling to make such payments along with the monthly installments, Chapter 13 is not a better option for debt settlement.
What about my situation?
This is not legal advice about your specific situation. We need to discuss your situation and your objectives and your rights and duties in a Chapter 7 in detail. Since the initial office consultation for potential bankruptcy clients is without charge, you can contact our office by calling (877) 315-5107 to schedule an appointment with Florida Bankruptcy Chapter 7 Attorney or fill out the contact form on our website, and someone from our office will call you regarding your specific situation.
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