The recent economic downturn has forced many individuals to consider filing for bankruptcy. Chapter 7 bankruptcy, also called “liquidation bankruptcy,” is available to those who reside in, or have property or a business in the United States. The advantage of filing for Chapter 7 bankruptcy is that it discharges debts such as credit card and medical bills.
In Chapter 7 bankruptcy, all the debtor’s assets other than exempt property are handed over to a bankruptcy trustee. (Exempt property includes all equity in the home, up to $1000 of equity in your car, and up to $1000 in miscellaneous personal property.) The bankruptcy trustee then sells the assets and the profits are then given to creditors.
New bankruptcy laws require you to pass a “means test” in order to file for Chapter 7. To pass the means test, your monthly income must be under the Florida adjusted median income. Under certain circumstances, you may still be able to file for Chapter 7 bankruptcy even if your monthly income is above the Florida adjusted median income. If you do not pass the means test, however, your best option may be to file for Chapter 13 bankruptcy.
Chapter 13 bankruptcy is available only to individuals, not to businesses. Under Chapter 13, you and your attorney come up with a plan to pay off a portion of your debts over three to five years. The payment is made to a bankruptcy trustee, who then pays off your creditors. It may be a better option to file for Chapter 13 instead of Chapter 7 bankruptcy if 1) your monthly income is too high to qualify for Chapter 7, 2) you want to prevent a home foreclosure, 3) you need to take care of some types of tax debts and child support obligations, and 4) you want to protect property that may be taken away under Chapter 7 bankruptcy.Business Chapter 7 and Chapter 11
Recent economic conditions have also forced many businesses to consider filing for bankruptcy. Businesses can file for Chapter 7 bankruptcy, which means that a court-appointed bankruptcy trustee will liquidate the business’s assets and give the proceeds to the creditors. After the distribution of assets, the business will no longer remain in operation, and its creditors can no longer litigate or collect payment for their debts.
Chapter 11 bankruptcy is a good option for businesses who wish to restructure the business to meet its debt obligations without ceasing operations. In Chapter 11 bankruptcy, the business will come up with a new plan to pay off its debts. The creditors then vote on the new plan in bankruptcy court, and if they vote in favor (or if the court chooses to impose the plan), the plan is adopted as a new agreement.
Florida attorney Christopher J. Shipley has years of experience helping both individuals and businesses file for all three types of bankruptcy. Call the Shipley Law Firm & Title Company today for a consultation, and an experienced attorney will advise you on the legal option that is best for you.