Chapter 7

Alyssa Shorstein is the St. Augustine Chapter 7 bankruptcy lawyer at our firm who handles bankruptcy cases in the Jacksonville Division Middle District of Florida. People living in Flagler, Putnam, St. Johns, and Duval counties would be filing a bankruptcy in the Jacksonville Division.

A chapter 7 bankruptcy allows for someone to wipe out the qualifying debt and start fresh with a new, clean slate. In general, to be qualified to file a Chapter 7, an individual or married couple must:

1. Pass the “means” test (See below for more explanation).
2. Own assets that can be exempted and/or be able to enter into a “buy back” for those assets that are not exempt if the desire is to keep those unexempt assets (See below for more explanation).
3. To be able to file in Florida, you must have lived in the state for at least 6 months before filing and to be able to use Florida’s bankruptcy exemptions, you must have lived in the state for 2 years. In certain circumstances, if you have not lived in the state of Florida for more that 1215 days before filing, then your homestead exemption may be capped. This is a scary exception to Florida’s very generous homestead exemption and one of the many reasons that anyone considering filing for bankruptcy should consult an experienced bankruptcy lawyer BEFORE they file.
4. You also cannot have filed a Chapter 7 bankruptcy wherein you received a discharge within 8 years before your file another Chapter 7.

Income / Means Test

To be able to file a Chapter 7, your income must be below median for your household size. The income levels change periodically to be increased with the standard of living. Even if your income is too high, then you can bypass the means test and still file a Chapter 7 if most of your debt is “non-consumer” debt. Non-consumer debt includes business debt and medical debt, among others. Consumer debt includes debt that is accrued for family purposes like a home mortgage, personal car loan, and credit cards so used. Our St. Augustine Chapter 7 bankruptcy lawyer will meet with you to figure out whether your income and/or type of debt qualifies for a Chapter 7 filing.

Debts

People often ask about which kinds of debts they can get rid of or “discharge” in bankruptcy. The debts that are generally discharged are unsecured debts such as credit card and medical debt. “Unsecured” debts are those that are not attached to property, and also include income tax debts and student loans. Most tax debt is not dischargeable; however, some income tax debt can be discharged if the qualification standards are met. Unfortunately, most student loan debt is not dischargeable, but there is now a student loan modification mediation process in our district that can be utilized for help with the payment structure.

A “Secured” debt would be a debt that is attached to property, such as a car or home loan. So basically, if the creditor can come get your asset because you do not pay for it, then that debt is secured. You can discharge secured debts in bankruptcy if you are also giving up the asset that the debt is attached to. You can elect to keep the assets that are secured by a debt for which you are current on payments by entering into a “reaffirmation” agreement after the bankruptcy is filed. A “reaffirmation” agreement is a contract with the creditor where you promise to continue paying on the loan, which is not then discharged by the bankruptcy.

There are debts that are not allowed to be discharged. Our Chapter 7 bankruptcy attorney in St. Augustine will review your debts to advise you of whether you may have nondischargeable debts. Those debts are described in 11 U.S. Code § 523 and include debts obtained by fraud, debts for domestic support obligations (alimony and child support), and debts that are for fines payable to a government entity. It is important to note that if someone is alleging that you defrauded them, then you may still have a chance to discharge that debt and would most likely be better off filing for bankruptcy before a judgment is rendered.

Exemptions

When someone files for bankruptcy, they are allowed to keep or “exempt” certain of their assets from the process so that it is not part of the bankruptcy estate. This does not mean that these assets are not disclosed. Everything you own and everything you owe must be listed on the bankruptcy paperwork, and then those assets that can be exempt are listed as exempt and protected. Florida exemptions include homestead of up to a ½ an acre within a municipality or 160 acres if outside of a municipality, $1000.00 of car equity, $1000.00 of personal property, $4000.00 of wild card personal property if no homestead exemption is claimed, life insurance cash surrender values, and qualified retirement accounts. It is extremely important to exempt your property correctly. If you own property that is not exempt, then you can choose to either “buy back” that property at a discounted rate or turn it over to let it be sold and the proceeds go to your creditors. If you have property that you want to keep, but that is not exempt and that is worth more than you can reasonably “buy back” in a Chapter 7, then a Chapter 13 may be the better option for you because you can “buy back” that unexempt equity over a longer period of time, thus making the payments possible. This is a very generalized discussion of exemptions and is something we spend a good deal of time on within the consultation with our Chapter 7 bankruptcy attorney in our St. Augustine office and throughout the prefiling stage.

Bankruptcy is a large undertaking that should be carefully vetted before filing. There are many pitfalls that can be very harmful to you if not recognized and appropriately handled beforehand. Call now at (904) 829-3035 to set up your free consultation to find out the best option for you.