Individuals who pass a means test can potentially file for Chapter 7 bankruptcy. Adults in Florida past the means test by adjusting their income and comparing it with the state median for their household size. Chapter 7 bankruptcy is popular in part because it is so fast. People can go from their initial filing to their discharge in a matter of months instead of waiting years while making payments.
However, some people who qualify for Chapter 7 bankruptcy still choose to pursue Chapter 13 bankruptcy instead. They may do so because Chapter 7 bankruptcy often requires the liquidation or sale of certain assets.
Individuals can exempt some property, but their personal possessions are at risk of liquidation to repay their creditors prior to their discharge. The assets people worry about the most are often retirement savings, real estate and vehicles. If you own a car, is your vehicle at risk of sale in a Chapter 7 bankruptcy?
You can protect some vehicle equity in Chapter 7 bankruptcy
Florida law does have an exemption for a personal vehicle. However, it is relatively low. An individual filing for Chapter 7 bankruptcy on their own can only protect $1,000 in vehicle equity during a Chapter 7 bankruptcy. They may have to refinance the vehicle or use it as collateral for a loan if they have more equity than that.
Married couples filing jointly can combine their exemptions to protect $2,000 in equity in a single vehicle. Married spouses could also each protect $1,000 of equity in two different vehicles.
A careful financial review is key in the early stages of bankruptcy
If you want to regain control of your finances and discharge as much of your unsecured debt as possible, you need to be very studious in your approach to your bankruptcy filing. From carefully evaluating your income to see if you passed the means test to reviewing an exhaustive list of your personal assets, there are numerous steps you need to ensure you properly complete if you want to maximize what you gain from bankruptcy while limiting what you stand to lose.
Learning more about the rules that apply to individual Chapter 7 filings in Florida will help those preparing for personal bankruptcy.