In short, a Chapter 7 bankruptcy is a bankruptcy that gets rid of your debt without requiring monthly payments to creditors. Most people filing a Chapter 7 can protect their assets with the exemptions allowed under Florida exemptions and federal law. A Chapter 13 bankruptcy involves a repayment plan, which allows you to keep all your property as long as you make all your scheduled monthly payments. Both types of bankruptcy can result in reducing the amount of money that you must pay your creditors.

The bankruptcy code will dictate if you are eligible to file under Chapter 7 or Chapter 13. Chapter 7 is more commonly used, but you must prove financial need by passing the means test.  Chapter 13 is suitable for those who are not eligible for Chapter 7 or for those who:

  • Need relief from debts that are not dischargeable under Chapter 7 (such as non-support debts related to divorce, debts for willful damage to property, or certain criminal fines)
  • Have fallen behind on house or car payments
  • Have tax debts

Learn more about the reasons to file for a Chapter 13 bankruptcy.

It depends. The amount of debt that will be discharged depends on many factors, including your income, assets, type and amount of debts, and expenses.  Also, there are certain debts that are not dischargeable. View a summary of Chapter 7 non-dischargeable debts or Chapter 13 non-dischargeable debts.

Not necessarily. Chapter 7 bankruptcies never result in deductions from your paycheck. If you file for a Chapter 13 bankruptcy, you may voluntarily choose to have your debt repayments taken from your paycheck, but it is not mandatory. Instead, you may make monthly payments to the bankruptcy trustee using a cashier’s check or a money order.

You are not legally required to use a lawyer to file for bankruptcy. However, bankruptcy courts have recommended the use of a bankruptcy attorney.  “Ignorance of the law may cost you far more than attorney’s fees.” — quoted from the United States Bankruptcy Court for the Middle District of Florida’s General Information document.

A Chapter 7 bankruptcy filing typically takes 4-6 months. A Chapter 13 bankruptcy repayment plan can last 3-5 years.

Most of the time, yes. However, if the court decides that you accrued credit card debt with no intent to repay it, bankruptcy will not discharge your credit card debt. For example, if you made excessively large purchases/charges immediately before filing for bankruptcy, those charges would not be waived by bankruptcy.

Typically, yes. Most forms of retirement savings, such as most 401K’s and pension plans, are untouchable by creditors and the bankruptcy trustee. Others, such as IRA’s, may be exempted up to $1,000,000.

The short answer is, yes. In fact, debtors who have recently filed for bankruptcy are often targeted by lenders to receive credit cards (although the fees and interest rates will be extremely high and undesirable).

Note that a bankruptcy filing will be noted on your credit report for 10 years. The discharged debts will also be noted on your credit report, which is in your favor, as this shows a reduction of your outstanding debts. Also, note that it typically takes two years after bankruptcy to qualify for a new home mortgage loan that has a reasonably low deposit requirement and interest rate.

By law, employers cannot discriminate against current or potential employees who have filed for bankruptcy.

If you have some additional bankruptcy questions, please feel free to contact Richard Ellis at 941-351-9111.

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