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Chapter 7

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Chapter 7

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Chapter 7

Chapter 7 is often known as a fast-track or straight bankruptcy. Typically the process takes 4 to 6 months from start to finish. 

Here are the “Pros and Cons” of Chapter 7 bankruptcy:

Pros:

  • Immediate relief — the day you file for CH 7, all debt collectors must immediately stop harassing you (or even contacting you!). This is known as the “automatic stay.” 
  • Very fast — unlike CH 13 or debt consolidation — typically there is no repayment plan. 
  • Keep your home! In Florida, you will not lose your home in CH 7 bankruptcy — the equity in your home is not “counted” as an asset in CH 7.
  • Keep your retirement! — IRAs, 401ks, pensions and annuities are considered exempt in Florida — which means these assets are not “counted” in CH 7.
  • Stops foreclosure or eviction — the filing of bankruptcy will at least temporarily stop a state court action — like a foreclosure sale.
  • Rapid recovery! A person’s credit score will generally improve dramatically after completing a CH 7 – debt to income ratio has been reduced and the negative reporting by creditors immediately stops. 

Cons:

  • CH 7, for the most part, is income based. In order to qualify, a debtor must pass the “Means Test.” The Means Test is your average monthly household income over the past 6 months. Once the monthly income is calculated, multiply that monthly number by 12 to determine the annual household income.  Below is the Florida median income chart:

 

1 Member Household – $41,334.00

2 Member Household – $51,839.00

3 Member Household – $53,952.00

4 Member Household – $63,196.00

5 Member Household – $71,296.00

6 Member Household – $79,396.00

7 Member Household – $87,496.00

8 Member Household – $95,596.00

9 Member Household – $103,696.00

10 Member Household – $111,796.00

 

  • If your income is more than the Florida median income for your household member number, then a further means test calculations must be completed to determine if you qualify for CH 7.
  • CH 7 does not wipe out student loans;
  • CH 7 does not wipe out all IRS or state taxes;
  • If you have expensive property or assets – CH 7 may not be for you – you could lose valuable assets – boats, motorcycles, cars, jewelry, etc. is not “exempt” in CH 7.

The best way to determine whether you qualify for CH 7 is always a free consultation with one of Boss Law’s bankruptcy attorneys.

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