Chapter 7 Bankruptcy
WHAT IS A CHAPTER 7 BANKRUPTCY?
A bankruptcy filed under Chapter 7 of the Bankruptcy Code is often the most efficient and least expensive way to eliminate debt through bankruptcy. For those who qualify it allows you to receive a discharge of credit card debt, medical bills, signature loans, debt on vehicle repossessions and other such unsecured debt. You can often keep all of your personal property (furniture, clothing, jewelry, vehicle, etc.) assuming the value of your property can fit within the exemptions allowed by law.
WHAT PROPERTY CAN I PROTECT IF I FILE BANKRUPTCY IN FLORIDA?
(This is a partial list of exemptions covering the most common issues)
A. Personal property – furniture, clothing, jewelry. etc.
* $1,000.00 worth of personal property for someone filing individually
* $1,000.00 per person for husband and wife filing together (total of $2,000.00) However, Florida recently passed a law raising the exemption from $1,000.00 to $5,000.00 when a person does not receive the benefit of the homestead exemption. This means a married couple can protect $10,000.00 worth of personal property if a) They don’t own a home or b) They intend to walk away from their home – some other exceptions may apply. The extra $4,000 per person exemption is not available if you file under Chapter 13.
B. Equity in a motor vehicle of up to $1,000.00. But if a car is worth $10,000.00 and you owe that much or more on the vehicle, you don’t need the exemption and can keep the vehicle as long as you stay current on the payments.
C. Homestead property (the place where you live and intend to stay) – up to ½ acre inside city limits and up to 160 acres if you live outside city limits in the county.
D. IRA’s, Annuities, 401(k) Retirement Plans, Social Security income, Pension money, etc.
Chapter 13 Bankruptcy
WHAT IS A CHAPTER 13 BANKRUPTCY?
A Chapter 13 bankruptcy requires you to make a payment to the bankruptcy trustee for a period of three to five years. That payment is determined based mainly on two things. First, your income and expenses, and second, the amount of money you would have paid to creditors if you had filed a Chapter 7. People with too much income or too many assets often find a Chapter 13 bankruptcy succeeds where a Chapter 7 would not. We frequently file Chapter 13 plans where unsecured creditors (credit cards, medical bills, repossessions, etc.) receive only pennies on the dollar.
WHY FILE UNDER CHAPTER 13?
Things you can do in a Chapter 13 bankruptcy:
1. Mortgage reinstatement – A Chapter 13 bankruptcy can require a mortgage lender to put your mortgage back on track where you can catch up on the past due amount over several years.
2.Mortgage lien stripping – A Chapter 13 bankruptcy allows you a way to strip off a second mortgage from your homestead property, if you can prove that the amount owed on your first mortgage is greater than the value of your homestead property. The amount owed on the second mortgage is then treated as an unsecured debt.
3. Avoid surrendering property – In a Chapter 7, if you own property or things of significant value that don’t qualify as exempt, you would be required by a Chapter 7 trustee to pay for those items (usually within one year) or in the alternative turn those items over to the trustee. In a Chapter 13, you can stretch that payment out over 3 to 5 years. So, where the payment is unaffordable in a Chapter 7, it is more easily afforded in the Chapter 13.
4. Mortgage modifications can often be accomplished in conjunction with a Chapter 13 where the lender is required to submit to mandatory mediation.