If you have a significant amount of debt and are finding it impossible to manage it, bankruptcy may be an option you have already considered. The bankruptcy process is complex and largely misunderstood by many people. As you move through the process, there are many different requirements you must meet and procedural rules you must follow. Unfortunately, it is not a simple matter of filing papers with the bankruptcy courts before your debt is discharged. A Wilton Manors bankruptcy attorney can help you determine which type of bankruptcy is right for you, and make sure you follow proper procedure.
Qualifying for Chapter 7 Bankruptcy
The most common type of bankruptcy people file is Chapter 7. It is also the most straightforward. A Chapter 7 bankruptcy will discharge most of your debt. When your debt is discharged, you are no longer legally responsible for repaying it. Borrowers must qualify to file Chapter 7 bankruptcy, which involves passing a means test. During a means test, you will have to prove that you are not earning enough income to repay your debt and other daily expenses.
If you file Chapter 7 bankruptcy, you are also required to attend a meeting of the creditors, also known as the 341 meeting. During the meeting, the facts of your case will be verified. Any property exemptions you have claimed will be confirmed. The creditors you currently owe may attend the meeting, although they are not legally required to. These creditors can make a claim to any proceeds from the sale of your property to help repay the debt you owe.
While it is true that it is possible to lose some property during a Chapter 7 bankruptcy, that also does not mean it happens in all cases. Many borrowers make it through the process without relinquishing any of their property at all. Florida law provides some of the most generous exemptions in the country. For example, under Florida law you can claim 100 percent of the equity in your home.
Filing Chapter 13 Bankruptcy
You may be able to discharge some of your debt during a Chapter 13 bankruptcy. However, the majority of your debt will be reorganized into a new repayment plan. Most repayment plans extend between three and five years, which means that you will have some time to repay your debt and your payment amounts will be lower, meaning they will be easier to repay.
Many people do not qualify for Chapter 7 bankruptcy because they do not pass the means test. Chapter 13 is a great option for those who are ineligible for Chapter 7. Borrowers also usually do not lose any of their property during a Chapter 13 bankruptcy, as their debt is not discharged.
Understanding Exemptions in Bankruptcy
Although it is true that some of your property may be sold to help repay a portion of your debt, Florida law does outline some exemptions. These exemptions protect property from being sold as part of the bankruptcy process. Both Chapter 7 and Chapter 13 include exemptions, however, non-exempt property is treated slightly differently, depending on which type of bankruptcy you file.
During a Chapter 7 bankruptcy, the bankruptcy trustee determines which property is not exempt. They will then sell the non-exempt property and distribute the proceeds among the creditors in an attempt to cover a portion of the debt still owed. Property is not generally sold during the Chapter 13 bankruptcy process, but the equity value of any property that is not exempt must be paid by the borrower. The payments are added to the repayment plan or are taken from the individual’s disposable income, depending on the amount that is greater.
Florida law does provide many protections for those who file bankruptcy, but they are all subject to residency requirements. These requirements are different from the requirements that make one eligible to file bankruptcy in Florida. To file bankruptcy in Florida, you must have lived in the state for 180 days prior to the filing date. To take advantage of the exemptions, you must have lived in Florida for at least 730 days before the filing date. If you meet the residency requirement to file bankruptcy but not the exemptions, you can still file bankruptcy in Florida. However, the exemptions of the state you moved from will apply.
There are many bankruptcy exemptions outlined in Florida law, but some of the most common are as follows:
- If the homestead exemption is used, a maximum of $1,000 in personal property such as electronics, furniture, and art
- If the homestead exemption is not used, a maximum of $4,000 in personal property
- Tax refunds and credits
- Prepaid medical and health savings accounts
- Prescription health aids
- Certain savings such as those for health, education, and hurricanes
- A maximum $1,000 of equity in a motor vehicle; this amount increases when married couples file together
- A maximum of $750 wages of the head of household’s wages, or 75 percent of the federal minimum wage, depending on which is the greater of the two
The homestead exemption, if used, protects 100 percent of the equity in your home. To apply, the property cannot be greater than one-half acre in size if it is located in a municipality, or over 160 acres in size located in other areas. Additionally, to be eligible for the homestead exemption, the party filing bankruptcy must have owned the premises for at least 1,215 days before they filed their petition with the court.
Our Bankruptcy Attorneys in Wilton Manors Can Advise on Your Case
Many people think filing bankruptcy is fairly easy, but that is not always the case. At Loan Lawyers, our Wilton Manors bankruptcy attorneys can help you determine which type of bankruptcy is right for you, and establish ways to protect your property, and your rights. Call us now at (954) 523-4357 or reach out to us online to schedule a consultation with one of our seasoned attorneys for a free review of your case.
