Chapter 7 Bankruptcy is the most commonly filed type of bankruptcy.
Under Chapter 7, the debtor’s assets are “liquidated” to discharge unsecured debts.
If you have problems with credit card debt, payday loans or medical bills, filing for Chapter 7 bankruptcy might be a good option.
When filing for Chapter 7 bankruptcy, all of the debtor’s assets become the property of what is known as the bankruptcy estate.
The estate is managed by a court-appointed trustee whose job is to liquidate the property to help pay unsecured debts.
Will I lose my home in a Chapter 7 Bankruptcy?
Many people are reluctant to consider Chapter 7 because they think they will lose all of their belongings, including their home.
However, there are certain exemptions under both Florida and Federal law which allow a debtor to keep certain critical assets.
Florida law allows a homestead exemption for those filing for Chapter 7.
The homestead exemption amount is $130,000 per spouse. This exemption allows many seeking Chapter 7 to hold on to their home.
Florida also offers exemptions for a limited amount of personal property.
If a bankruptcy declarant and spouse can keep their home, they may each keep $1000 worth of personal property.
They are also allotted $1000 each to apply toward maintaining control of their vehicles.
What about my car?
Chapter 7 bankruptcy alone won’t save a home from foreclosure or a car from repossession. However, the debtor has the option to “surrender” these items, earning a “super exemption” of $4000 for each spouse.
If a debtor is not a homeowner, they may use that “super exemption” to retain possession of their vehicle, if it is already paid off.
What Is Chapter 13?
Chapter 13 bankruptcy is debt solution that allows wage earners to pay some or all of their debts over a period of several years.
You and your attorney will work together to create a repayment plan, allowing you to get a clean slate.
Chapter 13 is available to those who earn too much income under the “means test” to qualify for Chapter 7.
How is Chapter 13 Different from Chapter 7?
Chapter 7 calls for a total liquidation of assets, allowing the discharge of almost all debts. However, those who earn a decent income and can afford to pay some of their debts can in many cases use Chapter 13 to retain some of their assets, like their home.
Some debts may be discharged entirely, while others may be repaid according to a plan.
Are All of my Debts Discharged Under Chapter 13?
In Chapter 13 cases, some debts are discharged while others may be restructured or placed under a payment plan to allow the debtor to pay over time.
These payment plans are often used to repay important debts like a home mortgage that is past due and on the road to foreclosure.
Chapter 13 can also be used to help a debtor whose car loan is “upside down” (when the loan amount is higher than the fair market value of the vehicle.
There is a cap on the amount of debt that can be discharged in a Chapter 13 bankruptcy.
Debtors can discharge $336,900 in unsecured debt, $1,010,650 in secured debt. Even though Chapter 13 is available to those who do not pass the Chapter 7 bankruptcy means test, there are still income limitations.
A means test is necessary if the debtor’s monthly income surpasses the state median income.
Which Bankruptcy Option is Right For Me?
Everyone’s financial situation is different, and the means tests that are required to file Chapter 7 or Chapter 13 are complicated.
An experienced Tampa Bankruptcy attorney will be able to help you determine which course of action is best for you. Take the first step toward taking back control of your finances.
Click Here or Call us at 1-800-984-9951 today and let our team help get your life back to normal