Is Chapter 7 Bankruptcy Right For Me?

Published on July 7, 2020 by J. Andrew Meyer

Is Chapter 7 Bankruptcy Right For Me?

With unemployment at record breaking levels and no end to the economic downturn in sight, many Americans are struggling to make ends meet and are amassing large amounts of debt. If you are considering bankruptcy, there are a few types you should be aware of in order to come to an informed decision on which best fits your circumstance. Here’s a brief overview of what Chapter 7 bankruptcy involves from filing to discharge. Whether Chapter 7 bankruptcy is the most appropriate option for your financial situation is a case specific inquiry that is best done with the consultation of an experienced bankruptcy attorney.

What Is Chapter 7 Bankruptcy?

Often described as “fresh start” bankruptcy, chapter 7 is the most common and simplest form of bankruptcy. Chapter 7 seeks to discharge all debt by liquidating (selling) your assets. Individuals, partnerships, and corporations are all eligible for Chapter 7.

Notably, a Chapter 7 bankruptcy case does not involve a plan of repayment. Instead, the bankruptcy trustee gathers and sells certain of the debtor’s assets and uses the proceeds to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. However, bankruptcy law allows the debtor to keep certain “exempt” property such as a car, clothing and household goods. Accordingly, potential debtors should realize that the filing of a petition under Chapter 7 may result in the loss of property. In practice most people who file Chapter 7 get to keep almost all of their personal property and assets.

Am I Eligible For Chapter 7?

Eligibility for Chapter 7 is based on a few different factors. If the debtor’s current monthly income is above the state’s median, the court will do what is called a “means test” to determine if the debtor is eligible for Chapter 7. This test looks at the debtor’s monthly income over the last 5 years to determine if Chapter 7 would be abusive, and thereby inappropriate under the law. Unless the debtor overcomes the presumption of abuse, the case will generally be dismissed or converted to Chapter 13 bankruptcy which typically involves a three-to-five year repayment plan.

The Chapter 7 Process

A Chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives, or where the debtor’s business is organized or its principal place of business or principal assets. In addition to the petition, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. Once filed, the case is assigned to what is known as a trustee. The role of the trustee is to administer the case and liquidate the debtor’s nonexempt assets. The trustee accomplishes this by selling the debtor’s property if it is free and clear of liens. The majority of individual Chapter 7 cases involve little or no assets. In those no asset cases, the trustee will normally file a “no asset” report with the court, and there will be no distribution to unsecured creditors.

Discharge In Bankruptcy

A discharge relieves individual debtors from personal liability for most debts and it prohibits the creditors who are owed those debts from initiating any actions to collect against the debtor. Chapter 7 discharge has multiple exceptions, so it’s important for debtors to consult with an experienced bankruptcy attorney before filing to discuss which debts may or may not be discharged. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors.

Florida Bankruptcy Attorneys

The attorneys and staff of The Bankruptcy Team have decades of combined experience helping clients with mortgage modifications, foreclosure defense and bankruptcy alternatives to effectively resolve their financial problems. If you are dealing with an unmanageable debt situation and are contemplating bankruptcy, reach out to The Bankruptcy Team to consult with one of our bankruptcy attorneys today.

J. Andrew Meyer

Andrew Meyer was born in Deland, Florida, in 1970. He graduated with an International Baccalaureate Degree from St. Petersburg High School in 1988, and attended the University of Florida, graduating in 1991 with a degree in Economics awarded with High Honors. Mr. Meyer also attended law school at the University of Florida, receiving his juris doctorate degree in 1995. While at the University of Florida, Mr. Meyer was inducted into Florida Blue Key and Phi Beta Kappa. Mr. Meyer was first trained as a lawyer by Richard T. Earle, Jr., and thereafter worked at the Attorney General's Office for the State of Florida in the Bureau of Criminal Appeals before becoming a senior staff attorney for the Florida Second District Court of Appeal. Mr. Meyer also served as a law clerk to the Honorable Chris W. Altenbernd, Retired, at the Second District Court of Appeal. Following his time at the Second DCA, Mr. Meyer worked at Carlton Fields, focusing his practice on appellate matters. In 2004, Mr. Meyer became an advocate for consumers as a partner at James Hoyer, and then later moved to Morgan & Morgan's class action department in 2009.

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Is Chapter 7 Bankruptcy Right For Me?