Chapter 7 bankruptcy often best applies to those facing the most severe financial challenges. Usually, it involves an approach where many non-exempt assets are liquidated to repay as much as possible to creditors before the debt is discharged. There is no other repayment plan, which is the case with Chapter 13.
This type of bankruptcy is sometimes referred to as the “clean slate” approach. Some who plan to file fear that this means that everything of value will be sold to pay debt, but this is untrue. There are several exemptions, even in Chapter 7. In Florida, these include:
- Homes: Florida’s homestead exemptions are generous and doubled if spouses file together. Notable exemptions include owning the home for 3 ½ years or more, and property size is limited to under a half-acre in the city and 160 acres in rural areas.
- Personal property: This is up to $1,000 and can include furniture, art or electronics.
- Wildcard exemptions: Those who do not own homes can increase the personal property amount to $4,000.
- Retirement accounts: ERISA, public employee retirement and many other types of pensions and retirement accounts are exempt.
- Health aids: These need to be prescribed.
- Savings: This can be individual accounts for healthcare, hurricane relief or education.
- Motor vehicle: $1,000 (doubled if filing jointly)
Each case is unique
The issues and details of each bankruptcy filing are different. Those considering filing Chapter 7 (or Chapter 13) often find it extremely helpful to discuss their financial situation with a bankruptcy attorney working here in Florida. The state can be generous with exemptions, but the best way to utilize them is to work with experienced attorneys.