What Does it Mean to File Bankruptcy?

Orlando area bankruptcy attorneys Eric Lanigan and Roddy Lanigan explain the facts and myths of filing bankruptcy are. What exactly does it mean to file Chapter 7 bankruptcy? In a word, bankruptcy is dissolution of debt.

Bankruptcy as a legal proceeding is the dissolving of a person’s assets to repay creditors.

Things You Should Know About Bankruptcy

While no one generally loses their home in a Chapter 7 bankruptcy proceeding, a Chapter 7 could be used to slow, hinder, even stop a foreclosure proceeding.

Florida is among a minority of states that allows filers of bankruptcy to discharge debts and be able to still live in their homestead. If you’re considering bankruptcy as a legal move, it helps to know that.

Any debtor filing bankruptcy action can have certain items of property exempted from the trustee’s order to sell a person’s belongings for debt reduction. There are some states that allow as little as four thousand dollars equity to be kept in a house while others don’t allow a house to be touched.

Very few items can actually be taken from debtors by bankruptcy trustees to be sold, but the amount of the property exempted in actuality is small. In Florida there are very specific possessions mentioned as being exempt from being liquidated for sale.

Florida generally has few non-exempt items an individual would have to worry about losing.

No one’s backing a truck up to your home to take away your things to sell to satisfy your creditors. Don’t listen to family, friends, associates who tell stories about having to relinquish furniture, TVs, electronics, computers, etc., relax. 

Bankruptcy Property Exemptions Vary by State

Property exemptions exist in every state that clarify what items you own that creditors can and cannot take. What happens on occasions where you hear of people losing property is that they’ve voluntarily pledged the property as security for a loan and don’t make the payments. But in general, in Florida, creditors aren’t forcing the sale of your property to get every dollar they can or the shirt off your back.

Watch this YouTube video by Eric Lanigan on the LaniganPL channel, “Exemptions in Bankruptcy” about exempt and non-exempt items in bankruptcy.

If you’re reading this and contemplating Chapter 7 bankruptcy and wondering what the process entails, you should understand that the filing of this legal motion does not end on the day that property will be taken and one must begin again. It is a three- to six-month legal proceeding.

Debtors will face a bankruptcy staying on a credit report for ten years however, it is very possible to get credit. As soon as a Chapter 7 bankruptcy is completed you will be able to begin rebuilding your credit. There are methods and options available that will allow you to hold a secured credit card, take out personal loans, buy vehicles and other items.

There is credit counseling required by debtors before and after filing that can show you how within two years of filing bankruptcy you may qualify and be able to purchase a home. While the APRs will be higher, fees and percentages higher, it is very possible to have a higher credit score after filing than prior to filing.

Bankruptcy no longer means that getting loans again during this 10-year period will be very difficult. However when you do secure a loan, the interest rate will be higher. It will be important to make payments on time so that the credit card rates don’t kick in each month. Anyone filing Chapter 7 bankruptcy will soon understand that the some items bought with credit will not be available the way they were before the bankruptcy is filed.

While there are many students who have the idea that once all of college has been paid for by federal student loans and the degree has been granted, that those loans can be thrown into the Chapter 7 bankruptcy, they’re wrong. Taxes, alimony, child support and federal student loans cannot be eliminated through a Chapter 7 bankruptcy.

Before spending up crazy amounts of money over the holidays and putting them on credit cards with the brilliant idea that you can file bankruptcy to eradicate the careless purchases, be aware that judges will not allow this to occur. Not all debts can be eliminated and don’t spend carelessly before, during or after the holidays or you will end up owing that money. 

Any bankruptcy judge will see right through that plan because it’s a common tact by debtors who get a little too confident. You will have to pay those debts back and the creditors will get the money from holiday shopping sprees. Your purchases will be carefully monitored for several months prior to filing so don’t go on shopping binges unless you plan on paying the amounts back in full.

Meet with Eric Lanigan and Roddy Lanigan. They will walk you through the bankruptcy process and answer questions to clarify what will happen in your particular case.