Chapter 7

Chapter 7 bankruptcy, also known as  “liquidation”

is typically what people think of when they hear the word “bankruptcy.” Chapter 7 allows you to eliminate certain debt WITHOUT repaying creditors. You may be able to eliminate debts stemming from credit cards, medical expenses, utilities, personal loans, and deficiencies from foreclosure or repossession.

Contrary to common misconceptions about Chapter 7 bankruptcy, a person who files for Chapter 7 may be permitted to keep their home or car or other property. If the property is encumbered by a debt, then you will be able to keep the property as long as you keep the payments current and sign what is called a “re-affirmation agreement.” By signing the re-affirmation agreement, you agree that you will make payments according to the terms the original loan.

Whether you are considering a mortgage modification or in the midst of the mortgage modification process, you are still able to obtain a mortgage modification even if you file for Chapter 13. Once the mortgage modification is approved, your payments will be reduced in your Chapter 13 plan.

 

You may still be able to file Chapter 7, even if you have equity in your home or car, as you are permitted to leave out certain property from your bankruptcy case. Federal and state law defines certain property as “exempt” from your bankruptcy case, which means such property cannot be touched by your creditors. The law provides you with a certain dollar amount for exemptions for different types of property. In Florida, you are permitted an unlimited dollar value exemption in your homestead. If you do not have equity in your home, and wish to surrender your home, you will be able to claim a higher dollar amount for personal property, such as a car, clothing, furniture, jewelry.

The property you are able to keep in Chapter 7 will vary greatly depending on your unique circumstances. For instance, if you are married, renting a home, own two motor vehicles with equity, then you may be able to claim up to $12,000 in personal property as exempt.

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