Are you drowning in debt? Are your bills piling up and you feel like there is no way out? Are you tired of hiding out from creditors who are calling you day in and day out? Many good people go through financial hardship. A job loss. An expensive medical condition. Other unexpected expenses. If you are in this type of situation, bankruptcy may be the best option to get out from the financial stress you are under.
Many people are against filing for bankruptcy because they believe it makes them irresponsible. However, the bankruptcy code was created for people who are struggling financially. Countless individuals have used this option to obtain a fresh start and recover from their financial problems. And this includes some of the most successful people in our society.
At the Law Offices of Whibbs, Stone & Barnett, P.A., we understand the financial struggles many families have to go through, especially when there are downturns in the economy. For many who are in these circumstances, bankruptcy is an option worth considering. There are two types of consumer bankruptcy that are available; Chapter 7, Chapter 11, and Chapter 13. There are significant differences between the two programs, and we can sit down with you to go over each and help you decide whether either option is right for you, or if a different financial solution makes more sense.
Chapter 7 Bankruptcy
Also known as a “straight” or “liquidation” bankruptcy, Chapter 7 is the most common type of consumer bankruptcy. Through Chapter 7, consumers and small business owners can eliminate most types of unsecured debt, allowing them to essentially “start over” financially and begin to rebuild.
Here’s a list of some of the most common unsecured debts you can discharge (get rid of) through Chapter 7 bankruptcy:
- Credit Cards
- Payday Loans
- Medical Bills
- Most Unsecured Personal Loans
- Utility Bills
- Most Wage Garnishments
- Most Court Judgments
- Certain Types of Tax Debts
There are some unsecured debts that you cannot discharge through Chapter 7 bankruptcy. Among the most notable include:
- Most IRS Tax Debts
- Government-Backed Student Loans
- Child Support
- Alimony/Spousal Support
- Credit that was Obtained through Misrepresentation or Fraud
Chapter 7 bankruptcy works best for those who have a very low monthly income, a high amount of unsecured debts, and very few financial assets. For those in this situation, wiping out all qualifying unsecured debts can be a major financial relief.
It is important to note that not all consumers qualify for Chapter 7 bankruptcy. If you earn less than the median income in Florida, then you are automatically eligible for this option. If you earn above the median income, however, you must complete a means test to see if you qualify. This test is based on a complex formula that essentially measures how much disposable income you have left over each month after subtracting your monthly expenses from your monthly income.
What Property Can I keep with a Chapter 7 Bankruptcy in Florida?
One of the major deciding factors in whether or not to file for Chapter 7 bankruptcy is the property exemptions. In a liquidation bankruptcy, you are supposed to “liquidate” all of your assets in order to pay as much of your outstanding debt as possible. But thankfully, all states allow you to exempt a portion of your assets in a Chapter 7, protecting them from liquidation.
In Florida, you are allowed to exempt an unlimited amount of equity in your homestead, as long as your property is no larger than a half an acre if you are in a municipality, and no larger than 160 acres elsewhere. In order to qualify for the Florida homestead exemption, you must have owned your property for at least 1,215 days. If you do not meet this requirement, then you will need to use the Federal homestead exemption, which is up to $25,150 in equity for cases filed on or after April 1, 2019.
You are also allowed to exempt up to $1000 in equity in a motor vehicle if you are individual, and double that amount if you are married filing jointly. In addition, you are allowed to exempt certain other assets, such as:
- Up to $1000 in personal property, which may include items such as furniture, tools, and electronics;
- Most types of pensions and retirement accounts;
- Workers’ compensation, unemployment, Social Security, and Veteran’s benefits;
- Education and health savings accounts;
- Tax credits and tax refunds;
- Various other exemptions.
Florida also offers a wildcard exemption of up to $4,000 that can be used for any type of personal property. You may use the wildcard exemption if you do not claim the homestead exemption.
Chapter 13 Bankruptcy
For those who are not eligible for Chapter 7 bankruptcy or they are looking for a different financial solution, Chapter 13 may be a viable option. Chapter 13 is a court-approved debt consolidation plan that allows you to pay off your debts over a specified period of time (usually three to five years) by making one manageable monthly payment.
You can consolidate virtually any type of debt (both secured and unsecured) into a Chapter 13 bankruptcy and obtain a lower interest rate and more affordable monthly payment than you currently have. In some cases, you may even be able to pay back a debt interest free or for less than 100% of the principal balance due.
Only consumers can use Chapter 13 bankruptcy, it is not available to businesses. In addition, you will need a certain level of income to qualify. With this type of bankruptcy, you still need to pay back your debts, so you will need some form of income to make this work. On the plus side, you get to keep all of your assets and there are no personal property exemptions to worry about. You can also use this plan to pay back debts that would not be dischargeable through Chapter 7, such as unpaid taxes and child support, although these are considered “priority debts” and must be paid back in full even with a Chapter 13 debt reorganization plan.
Speak with a Knowledgeable and Compassionate Florida Consumer Bankruptcy Lawyer
Financial hardships can put enormous stress on individuals and families. There are many potential ways to get out of these circumstances, and many times, some type of consumer bankruptcy may be the best option. At the Law Offices of Whibbs, Stone & Barnett, P.A., we are here to serve you. We can meet with you to discuss your financial situation and explain in detail the pros and cons of Chapter 7 bankruptcy, Chapter 13 bankruptcy, and other options, so you can make the most informed decision on how you wish to proceed.
To schedule a free consultation with one of our attorneys, call our office today at 850-500-1111 or send us a message through our online contact form. You may also stop by our Pensacola office in person at your convenience.