Bankruptcy 101: An Introduction to Chapter 7 Bankruptcy

There are several types of bankruptcy available to individuals and businesses. Chapter 7 bankruptcy is the most common path for both individuals and businesses, although it is typically used by individuals. With Chapter 7 bankruptcy, debts are reduced and erased by taking inventory of your property and, with a few exceptions, selling it and giving the profits to your creditors. Of course, you can keep vital property such as your vehicle and a least a portion of the equity in your home.

Once you have completed the liquidation process, you will usually receive a discharge of all of the debts that you cannot afford to pay. That is, if selling your property is not enough to pay off a creditor, then that remaining debt will just be forgiven.

Apart from this vital information, some additional common questions that individuals who are considering filing Chapter 7 bankruptcy may have are answered below.

What Are the Advantages of Chapter 7 Bankruptcy?

Chapter 7 bankruptcy has the fastest and easiest process compared to the other types of bankruptcy. Most individuals can complete the bankruptcy process within just a few months. Different types of bankruptcy can take years.

Although the liquidation is somewhat daunting, many people prefer how fast and easy Chapter 7 is. You can discharge most of your debts within just a few months and move on with your life. Most Chapter 7 cases will be successful as well. In fact, nearly 95.5% of those who file Chapter 7 bankruptcy will have at least some of their debts discharged successfully.

Who Qualifies for Chapter 7 Bankruptcy?

The default for individuals is to file Chapter 13 bankruptcy. Under Chapter 13, you will create a payment plan that will provide payments to your creditors over the course of the next several years. Plans can be up to five years long. To avoid having a payment plan, you must qualify for Chapter 7 bankruptcy. You do this by going through the “means test.”

By using the “means test,” you will determine if your income is low enough to file Chapter 7 bankruptcy. It is designed to keep high-wage earners from using Chapter 7 and forcing them to enter a payment plan under Chapter 13 instead.

First, you must determine whether your income is higher than the median income level in Florida based on the number of people in your household. As of January 2018, for example, the median income level for one person in Florida was $46,677. For a family of four people, it was $74,512. If your income is below these levels, then there is no need to go any further in the calculation—you will qualify to use Chapter 7 bankruptcy in Florida.

You can still qualify to use Chapter 7 bankruptcy if your income is above the median level, but the calculation becomes more complicated. Rodriguez Law can help you determine if Chapter 7 bankruptcy is the right option for you and whether you qualify. Learn more by contacting our team at (305) 262-8226.

About Rodriguez Law, P.L.

Rodriguez Law, P.L. is dedicated to providing quality personal legal services to our clients. Our reputation for combining quality, knowledge, and technology to deliver efficiency and value makes us one of the most trusted law offices in Miami-Dade and Broward.