What Can Chapter 7 Bankruptcy Do For Me?
Filing for Chapter 7 bankruptcy is a viable means of resetting finances for individuals who are behind on their bills or can’t afford living expenses and monthly payments. However, individuals may lose some of their nonexempt property in this process. While it grants such individuals a fresh start, it doesn’t always wipe out all financial obligations. Individuals may have to liquidate some of their assets to pay off non-dischargeable debts such as alimony and student loans.
When filing for Chapter 7 bankruptcy in Florida, it would help to consult a bankruptcy lawyer to be sure what filing can and can’t do for you. This way, you get to know if it is right for you and how much debt can be discharged. Below, you’ll find out what Chapter 7 bankruptcy in Florida can and can’t do.
What Chapter 7 Bankruptcy Can Do
Generally, Chapter 7 will wipe out most of your unsecured debt and grant you a fresh financial start. Filing for Chapter 7 bankruptcy in Florida can do the following for filers:
Stop Harassment and Collection Activities by Creditors
Individuals struggling with debt go through various collection actions from creditors, including telephone calls, lawsuits, and wage garnishments. Upon filing for Chapter 7 bankruptcy, the court puts the automatic stay in place, which is an injunction that stops most of the creditors’ collection actions. This window of protection allows individuals to determine how much of their debt can be repaid and how much property can be retained or must be surrendered.
Wipe Out Most Unsecured Debts
The main aim of filing for Chapter 7 bankruptcy is wiping out unsecured debt. Such debts include unsecured credit card debt, overdue utility payments, medical bills, and even personal loans. Unsecured credit card debts are those in which an individual doesn’t promise to return the purchased property if they failed to pay the bill. However, individuals with a secured credit card may be forced to return the purchased item if they don’t pay the bill.
Chapter 7 bankruptcy cases in Florida take 3-4 months to conclude. After this period, any unpaid nonpriority unsecured debt is discharged by the court. This is after the nonexempt property has been liquidated to pay off your creditors. It is advisable to talk to a Florida bankruptcy attorney before filing for Chapter 7 to determine the property that can be liquidated to pay off your creditors.
Stop Repossession, Foreclosure, or Eviction
By filing for Chapter 7 bankruptcy in Florida, the automatic stay protects debtors from these actions, at least temporarily:
Foreclosure and Repossession
While the automatic stay will temporarily protect debtors from a foreclosure or repossession, filing for Chapter 7 won’t help you keep your home if you are behind on payment. However, individuals who are current on their payment (have equity in their home) get to keep their home in Chapter 7 bankruptcy, regardless of their equity.
Individuals who are behind on their house payment will have to bring their account current when they file and keep it current in the future if they want to keep their house. Otherwise, a lender may take the action afforded in your contract. The same applies to your car – you have to be current with your payment at the time of filing to avoid repossession by your lender.
In Florida, an eviction in the litigation process will stop after filing for Chapter 7 bankruptcy, but this stay will most likely be temporary. The stay might be lifted, and the landlord granted the power to evict you if:
- They received a judgment for possession before you filed for Chapter 7 bankruptcy
- They file a motion indicating that you damaged or endangered their property or are using illegal substances on the property. In this case, the court will decide whether to lift the stay or not after a hearing.
- You don’t make lease payments due after filing for Chapter 7 bankruptcy
Discharge Secured Debt
In Florida, filing for Chapter 7 bankruptcy can help wipe out secured debt, but you’ll have to surrender the purchased property. If you can’t make a payment – such as a car payment or mortgage that you secured with collateral – you can wipe out the debt by filing for Chapter 7 bankruptcy. However, you won’t be able to keep the item securing payment of that debt.
What Chapter 7 Bankruptcy Can’t Do
Chapter 7 bankruptcy doesn’t offer a solution to all your financial troubles. Here are some of the things it can’t do for you:
Prevent Foreclosure or Repossession of Property You Can’t Afford
Chapter 7 bankruptcy can eliminate some of your debts, but not liens. Liens give creditors or lenders a right of possession to your property, and they may take it or sell it and use the proceeds to pay off a loan balance. The lien stays on the property until you pay the debt in full. If you have a secured debt, Chapter 7 bankruptcy can wipe it out but won’t take the lien off the property. That means that the creditor can recover the collateral. For instance, filing for Chapter 7 bankruptcy can wipe out a home mortgage, but the lender’s lien remains on the home. If the mortgage is still unpaid by the time the automatic stay lifts, the lender can foreclose on the home.
Eliminate Student Loans
Student loans can’t be discharged by filing for Chapter 7 bankruptcy. However, this is possible if one can show that repaying the loan would cause them “extreme hardship.” It is hard to meet this standard, as you must prove that you can’t afford to pay your loan currently and will probably have no means to do so in the future.
Eliminate Alimony Obligations and Child Support
Alimony obligations and child support don’t go away in Chapter 7 bankruptcy. Filers will continue to owe these debts as if they had never filed.
Eliminate Most Tax Debts
Eliminating tax debts by filing for Chapter 7 bankruptcy in Florida is never easy, but it is possible. Conditions that must be satisfied before your IRS tax debt is discharged in Chapter 7 bankruptcy include:
- Taxes owed must be local, state, or federal income taxes
- The tax debt must have become due at least three years before filing for Chapter 7 bankruptcy
- For income tax, returns must have been filed at least two years before filing for Chapter 7 bankruptcy
- Your taxes must have been assessed at least 240 days before filing for Chapter 7 bankruptcy
Eliminate Other Non-Dischargeable Debts
Debts arising from personal injury or wrongful death cases due to your intoxicated driving can’t be discharged. Also, debts related to fraud may not be wiped out if a creditor convinces the judge in an adversary proceeding that the debt should not be discharged. Such debts may have been incurred by writing a bad check or providing false information on a credit application.
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