BANKRUPTCY CHAPTER 7
Sometimes, a fresh start makes sense–if you can get past what you think you know. There are many myths out there about bankruptcy, so we are here to help you clarify. Bankruptcy has a reputation based on a few tidbits of truth and lots of embellishment, it’s not nearly as frightening once you know the truth. Researching bankruptcy topics can move you forward, but we can give you the solid advice needed to understand your individual case.
Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness. They have struggles to pay their bills for months and just keep falling further behind.
The truth is, you can only file for Chapter 7 bankruptcy once every eight years. For Chapter 13 reorganization, you can file more often than that, but you can not have more than one case open at the same time.
Because all those debts will be gone. Filing for bankruptcy is the worst “negative” you can have on your credit report. Unlike other negatives, which stay on your report for seven years, bankruptcy can be there for ten (10) years.
The simple answer is yes.
It will not be long before you are getting credit card offers again. They will just be from lenders that may charge high interest rates. However, if you are planning to buy a house or a car, you might want to do that before you file. Those loans will be tough to get, and the higher interest rate on such a large purchase would make a significant impact on your payments. Also, if you have a credit card with a zero balance on the day you file for bankruptcy, you do not have to list it as a creditor since you do not owe any money on it. That means you might be able to keep that card even after bankruptcy.
Certain types of debts cannot be erased. They include child support and alimony, student loans and debts incurred as the result of fraud. If you’ve defrauded someone and a judgment has been obtained against you, they won’t be erased either.
These are the most common debts that cannot be eliminated in bankruptcy.
- Car accident due to intoxication or willful and malicious intent
- Child support and alimony
- Ex-spouse legal fees and credit card debt
- Income tax liability
- Restitution (defrauded or caused harm to someone and a judgement was obtained against you)
- Secured debts
- Student loans
According to the new bankruptcy law there is what is called a “means test” that is used to create a presumption whether the debtor may file a Chapter 7 bankruptcy. If the assisted person (consumer debtor under the new law) is below the medium income, there is no presumption of abuse. There is a presumption that the debtor can file a Chapter 7 bankruptcy. The vast majority of individuals who need to file for bankruptcy are under the medium income. Currently, the medium income figures range from $40,000.00 for a one person household to over $66,000.00 for a four person household. Just because the debtor is above the medium income it does not mean that a Chapter 7 Bankruptcy can not be filed. If the debtor is over the medium income, then the Means Test provides for deductions based on numerous categories, such as transportation expenses, food, secure debt, including mortgage payments, child support, alimony and health insurance, as examples. After the deductions have calculated, if that monthly income is under $110.00 per month, there is no presumption of abuse.
This is the misconception that keeps people who really should file for bankruptcy from doing it. While the bankruptcy laws vary from state to state, Florida has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in qualified retirement plans, household goods and clothing.
Generally, the homestead law in Florida protects homeowners from having their homes being sold by creditors to pay off their debt. Prior to BAPCPA going into effect there was an unlimited amount of protection under Florida law. Under the new law, a debtor who has an unlimited homestead exemption under Florida state law loses that exemption in bankruptcy unless the debtor has lived in Florida for more than two (2) years (730 days). Between 730 and 1215 days, the Florida homestead exemption is limited to $136,875.00. If the period is greater than 1215 days the debtor receives the benefit of the unlimited Florida homestead exemption.
In general, once you file for bankruptcy, any creditor actions (which includes foreclosure) will be stopped immediately. This means that if you are behind on your mortgage payments resulting in threats of foreclosure from your lender, then filing bankruptcy is an immediate way to protect your home.
A Chapter 7 is a liquidation. A Chapter 7 bankruptcy will discharge the debt owed on the home, but the debtor will lose the home in foreclosure. In order to keep the home, the debtor will need to file a Chapter 13 bankruptcy which can force the creditor to accept payments. The problem is, the debtor must immediately start paying the regular monthly mortgage payment plus bring the mortgage arrears current over a period of up five (5) years.
In April 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA ) was signed. The underlined theory behind BAPCPA was that debtor’s who could pay their debts, or at least a portion of their debts, were abusing the system by eliminating all of their debts in a Chapter 7. BAPCPA set up a system to analyze the debtor’s income and expenses in a structured way to determine eligibility for Chapter 7. The overwhelming majority of debtor’s who could file Chapter 7 bankruptcy under prior law can still file Chapter 7.
Not necessarily. It is not uncommon for one spouse to have a significant amount of debt in their name only. However, if spouses have debts they want to discharge that they are both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who did not file.
Unless you are a prominent person or major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors.
Maxing out credit cards prior to bankruptcy is fraud. The credit card companies in your case will review all your purchases right before your filing. They know what to look for and they can file objections to your bankruptcy discharge.
Why Choose Seff & Capizzi Law Group?
Seff & Capizzi Law Group offers a free initial consultation to review the circumstances of your case and give you the personal attention that you deserve. Alleviate your stress by having our team handle the paperwork and ensure your rights are being protected. We look forward to hearing from you.