Chapter 7 bankruptcy in Jacksonville Florida can often be a better choice than Chapter 13 bankruptcy. Chapter 7 is faster than Chapter 13. Many people also prefer these two things:
- Filers retain all or most of their property.
- Filers can’t pay creditors under a Chapter 13 repayment plan over three to five years.
Learn about the process and qualifications for filing for Chapter 7 bankruptcy in Jacksonville, Florida. Our experienced bankruptcy attorneys can help guide you through the process and determine if this is the right solution for your financial situation.
The Advantages of Chapter 7 Bankruptcy
Chapter 7 bankruptcy can be a quick and efficient way to get rid of debt. Most people prefer to file this chapter if they are able. Here’s how it works.
- It is relatively easy. The average Chapter 7 bankruptcy case can take four to six months.
- No repayment plan. This is different from Chapter 13 bankruptcy. A filer does not have to pay into a three- or five-year repayment plan.
- Many debts are wiped out. Non-dischargeable debts such as student loans and unpaid child support.
- Property can be protected. Many filers can keep all their property using bankruptcy exemptions. Bankruptcy allows you to protect most necessities. If you don’t possess luxury items, you may be able “exempt” (or protect) most or all of your property.
- A house or car can be kept in certain situations. If you are current with your payments, you can continue to make payments after bankruptcy. You can also exempt any equity in the property.
Who Should File for Chapter 7 Bankruptcy?
For many, Chapter 7 is very useful, especially for those who:
- Own little property.
- Have credit card balances, medical bills, or personal loans.
- A family whose income is below the state median for the same size family.
To determine if your income is eligible for bankruptcy Chapter 7 in Jacksonville FL, you will need to pass the means test. You’ll automatically become eligible if your income for the past six months has been below that of a similar-sized family in your state. If your income exceeds the median, you will be allowed to deduct expenses and get another chance to pass.
But, let’s say you have enough income each month to pay a substantial amount to your creditors. If this is the case, you won’t be able to file for Chapter 7 bankruptcy. This test examines your monthly income and budget, rather than looking at what you have made in the past six months.
Benefits Offered in Chapter 13, But Not in Chapter 7
Before you explore the options offered by Chapter 13, make sure that these criteria are met.
- You are an individual or sole proprietor. Corporations, partnerships, LLCs, and corporations cannot file for Chapter 13.
- You meet debt requirements. In Chapter 13, your debt can’t exceed certain limits. Chapter 11 bankruptcy will be used if your debt exceeds certain limits. You can see the current Chapter 13 debt limit here.
These benefits may be available to you if you can file despite these circumstances.
Get a Mortgage or a Car Loan
Chapter 7 is for you if your car or house payment falls behind. Why? These debts are “secured” which means that you have to give the property back to the lender if it isn’t paid as agreed. Bankruptcy Chapter 7 in Jacksonville FL also doesn’t have any mechanism to bring the loan current.
You can, however, make up any missed payments in Chapter 13 bankruptcy and keep your home, car, or other property that secured the debt. Learn more about how to pay off mortgage arrears or car loan arrears in Chapter 13 bankruptcy.
You Can Force a Creditor Into a Payment Plan
Certain debts are ” not dischargeable” which means they don’t have the right to be discharged in bankruptcy. These include newer income tax balances and domestic support arrearages. These types of debt have a high past-due amount.
Chapter 7 bankruptcy filings could result in your creditor attempting to collect all owed balances immediately after the bankruptcy case is closed. This could include garnishing your wages levying your bank accounts, or even seizing your property.
Instead, you can use Chapter 13 to pay off these debts over three to five years without fear of being subject to harsh collection actions. Learn more about bankruptcy.
Protecting a Co-debtor from a Personal Debt
A co-debtor is someone who helps you purchase a car or lease an apartment. If you don’t pay it, they’re responsible.
Chapter 7 will only discharge your obligation to repay, and not that of your codebtor. Your codebtor will still be responsible if you file Chapter 7 bankruptcy. The creditor would likely pursue the codebtor to make payment.
If you file Chapter 13 bankruptcy, however, the creditor will release your codebtor as long as your bankruptcy plan payments are kept current and the debt is fully paid. Find out more about what happens to codebtors during bankruptcy.
The Property You Lose in Chapter 7 Can Be Retained
You can keep the property “exempt” or protected from creditors when you file for Chapter 7 bankruptcy. Your bankruptcy trustee will sell any property not exempted by bankruptcy exemptions and use the proceeds to repay creditors.
Chapter 13 bankruptcy doesn’t require you to surrender any property. There is a catch. The repayment plan must be paid to cover the property’s value. Chapter 13 bankruptcy may be a better option if you have exempt property that you are unable to part with or can afford to pay.
You Can Pay Less for Cars and Other Property Over Time
You can sometimes use a Chapter 13 “cramdown” to reduce your owes on income-producing real property, cars, or other financed property that the bank could take back if the borrower doesn’t pay. The collateral’s value is reduced by a cramdown, which works well if you owe more than you are worth.
Here are the caveats. The cramdown does not apply to the house you live in. You must also pay the full reduced balance through the repayment plan. If you want to pay a monthly payment to consolidate the mortgage on your Pocono vacation home, be prepared for a substantial monthly plan payment.
A Junior Home Mortgage Can Be Canceled
If your residential property is less valuable than what you owe, Chapter 13 can provide a powerful benefit. The “lien stripping” mechanism in Chapter 13 allows you to remove a “wholly unsecured lien” from your house. A junior loan would not be paid if your house were sold.
Consider this: You owe $500,000 on your primary mortgage and $70,000 on the second junior mortgage. Your house is only worth $460,000. The proceeds from the sale of the house would not be enough to fully pay your first mortgage. There would also not be any money for the second mortgage. You could use Chapter 13’s lien-stripping procedure to remove the lien from the second mortgage.
Drawbacks to Chapter 13 Bankruptcy
These are some things that filers may be surprised to learn about Chapter 13 bankruptcy. They often find it a little challenging.
- If you want to have your qualifying debts erased by a bankruptcy court, you must follow the three-to-five-year repayment plan unless the court allows you to get off the hook for hardship reasons.
- You’ll have to pay all nondischargeable past-due taxes and support arrearages if you owe them. This is something that many people don’t have enough income for.
- You will need to repay arrearages under your plan to keep your house or car. However, you must continue to pay your monthly payment.
- People who file for Chapter 13 bankruptcy fail to complete their plans. This puts them at risk of not getting discharged from their debts.
Chapter 13 bankruptcy can be a viable option for those with regular incomes who are at risk of losing their home to foreclosure, or who need to repay tax or support arrearages.
Do You Need More Help With Bankruptcy?
Are you struggling with overwhelming debt in Jacksonville, Florida, and feeling like there’s no way out? At Bruner Wright P.A, we understand how difficult it can be to face financial challenges and we’re here to help. Our experienced attorneys specialize in bankruptcy Chapter 7 in Jacksonville FL and can guide you through the process to help you get a fresh start.
Other Services We Offer:
- CHAPTER 7 BANKRUPTCY
- CHAPTER 11 BANKRUPTCY
- CHAPTER 12 BANKRUPTCY
- CHAPTER 13 BANKRUPTCY
- BUSINESS BANKRUPTCY
- PERSONAL BANKRUPTCY
- BUSINESS LITIGATION
Areas We Serve
- Tallahassee, FL
- Jacksonville, FL
- Destin, FL
- Fort Walton Beach, FL
- Panama City Areas
- North Florida Region
Don’t let debt control your life any longer. With our help, you can put your financial troubles behind you and move forward with confidence. We’ll work with you to determine if Chapter 7 bankruptcy is the right solution for your situation and if so, we’ll handle all the legal details so you can focus on rebuilding your future. Contact Bruner Wright today to schedule a consultation and take the first step toward financial freedom.