What is Chapter 7 Bankruptcy?
Chapter 7 is designed for people who are having financial difficulties and are not able to re-pay their debts. Under the changes to the Bankruptcy Code that took effect October 17, 2005, you can usually qualify for a Chapter 7 if one of the following is true:
Your average gross monthly income for the last six months is below your state’s median income
Your gross income, less certain expenses, is below your state’s median income
You can show “special circumstances” that would allow you to qualify for Chapter 7.
Under Chapter 7, you can usually exempt, or keep, most or all of your assets under Florida law, or, if you have not lived in Florida for the past two years, under the state’s exemption law that applies to your case. Most retirement accounts and pensions are also exempt. Secured property, normally your car and house, may not have any net equity or is otherwise exempt, in which case you can keep it as well. The Chapter 7 Trustee may liquidate any non-exempt property and use the proceeds to pay your creditors according to priorities of the bankruptcy code.
Once your Chapter 7 case is over, you receive a discharge. The discharge prevents your creditors from taking any steps to try to collect their unsecured debt. They cannot call you, write you, sue you, or take any steps that could be considered an attempt to collect its debt. If you want to keep property that has a lien on it, you must keep your payments current, and may be required to reaffirm your debt. Some debts can not be discharged. Typical examples are child support, alimony, and other domestic support obligations, some taxes, student loans, criminal restitution, and debts for death or personal injury caused by operating vehicles while intoxicated with alcohol or drugs.
Why File for Chapter 7?
You may want to file for Chapter 7 bankruptcy for 1 or more of these reasons:
1. Your income is not over median family income for your household size. Median income is approximately:
$55,000 for a household of 1
$70,000 for a household of 2
$75,000 for a household of 3
$89,000 for a household of 4
$99,000 for a household of 5.
We can sometimes qualify people for Chapter 7 even if they make over median income.
2. You do not have non-exempt assets that a Chapter 7 Trustee will take and sell. Exemption law is complex but we have the expertise to protect your assets.
3. You do not have a regular income.
4. To discharge certain qualified aged tax debts to the U.S. Internal Revenue Service (IRS).
5. You do not have a pending personal injury claim.