What is a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is arguably the most common bankruptcy filing, accounting for an estimated 65% of all bankruptcy filings. Chapter 7 bankruptcy is where a bankruptcy trustee (a representative of all of your creditors) takes possession of all of the debtor’s non-exempt property, liquidates it, and gives the proceeds to the creditors. After this process is done, the debtor then receives their discharge. A discharge is the most important concept of the Chapter 7 Bankruptcy – it is where qualifying debt obligations are extinguished.
How can I use Chapter 7 Bankruptcy during my Foreclosure?
This is perhaps the most common question I get during a foreclosure defense consultation. A lot of individuals have heard about bankruptcy and often think it is their only option. This is simply not the case – foreclosure defense may have the same outcome for less credit implications. When you meet with me, I go over both options and usually recommend bankruptcy over foreclosure litigation in a few circumstances. Generally, there is other debt out there besides the house. If there are massive amounts of credit card debt, some medical bills, and other debts, I usually recommend bankruptcy. Why you may ask? My job as an attorney is to try to put you in a better position than when you retained me. If fixing the foreclosure doesn’t make sense, then a total discharge of debt may be better for your situation. Another, albeit rare, situation I tend to suggest filing a bankruptcy in is when the home owner is current on the first mortgage, but delinquent on the second mortgage.
How does chapter 7 bankruptcy work?
Chapter 7 bankruptcy filings are a very complicated process and involves 3 basic steps. Step one is information gathering. That is where you sit down with an attorney and go through your entire financial life to work up the bankruptcy petition. This is a total disclosure of all of your debts and assets. In order to qualify for a chapter 7 bankruptcy, no presumption of abuse of the bankruptcy code can be found. This is done by comparing your income to the median income for the state of Florida. This is called the means test and is calculated by using your income and liabilities (debts). We then apply exemptions to both all of your property. The amount of exemptions that you have depends largely on what the status of your primary residence is; namely, do you rent or own. After applying the exemptions you will have a good idea of what non-exempt property is out there that you may have to purchase back from the trustee. If all is agreeable, the petition is then filed. After filing the bankruptcy petition, the 341 meeting is held. The 341 meeting is a meeting of creditors where the contents of your bankruptcy petition is verified. Step three is a post 341 meeting time where the trustee and other creditors make motions and file proofs of debts owed. This length of this step generally takes the longest amount of time and differs in each case.
Free Bankruptcy Consultation!
Unlike foreclosure defense, I offer free bankruptcy consultations. To set up your free bankruptcy consultation, you must call my office at 813.502.6768. You can also e-mail me, but those requests take longer to process. The free consultation gives you a 30 – 60 minute time to discuss your options and find out more about the bankruptcy process.