Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is the most common form of bankruptcy case. This is what everything thinks about when they hear about a personal bankruptcy. Chapter 7 is also known as a Liquidation or Fresh Start. If you qualify and your situation fits, Chapter 7 Bankruptcy will give you the most advantages.
Qualifying for a Chapter 7 Bankruptcy
Only certain people qualify for a Chapter 7 Bankruptcy. The qualification is mainly based on your household income, and the easiest way to qualify is to have household earnings below the Florida median income. This can range from $42,000 up to $70,000 for household sizes between one and seven. If you do not qualify for a Chapter 7, you must file your case as a Chapter 13. The income period that determines the qualification is the prior six months before filing. Some people purposely reduce their income to qualify the Chapter 7. This method may be legitimate but may also bring claims of “bad faith.”
Items You Can Keep
Even though Chapter 7 Bankruptcy is a liquidation case, you can keep many different items of value. Each state has a slightly different scheme of what you can keep.
In Florida, some of the things you can keep:
- Most retirement accounts – no matter what the amount
- House with almost unlimited equity (with some exceptions)
- Personal items up to $1,000 in value (becomes $4,000 if you don’t own a house)
- Automobile with a value up to $1,000
This is only a partial list.
Items You Must Give Up
Some things that are worth a lot, may have to be surrendered to the Bankruptcy Trustee, such as:
- Paid off automobile worth a substantial amount of money
- Stocks or other investments that are not part of a tax-deferred retirement account
- Investment houses or land
- Expensive collections
- Large Sums of cash
Debt You Will Get Rid Of
The good part, by filing for bankruptcy you can eliminate large sums of debt, such as:
- Credit card bills
- Bills related to foreclosures
- Amounts owed for unpaid rent
- Certain back taxes (with some exceptions)
- Certain court judgments against you
Other Problems You Can Eliminate
One of the great things about Chapter 7 Bankruptcy is that you can fix certain problems, such as:
- Give back cars you don’t want and cannot afford
- End residential leases that you don’t want.
- Give back furniture you cannot afford
- Give back houses you cannot afford
For things you give back, the bankruptcy filing will protect you from claims made on amounts due.