Chapter 7 Myths
Many times when consulting with clients, the majority of the consultation is spent dispelling myths about bankruptcy. We’ve collected some of the most common and want to use this form to dispel some of those myths. You can also visit our YouTube page, and The Crushing Debt Podcast for additional related content.
First is that the trustee is going to take everything that the debtor owns. This is A myth because Florida law has certain exemptions, and federal law has certain exemptions that protect the debtor’s assets. If the value of the assets is less than the exemption, the assets are protected from the bankruptcy trustee. If the value of the assets is greater than the exemption, then Chapter 7 may no be the best alternative, and we find another option, but certainly that is something we will review and can possibly plan around in preparing the chapter 7 petition.
The second myth is that Chapter 7 Liquidation bankruptcy is harder to file. That also is not true. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) imposed restrictions on filing to curb what Congress perceived as “abusive” filings. A good bankruptcy attorney can navigate these issues to ensure that Chapter 7 is appropriate and, in the event it is not, find another solution for you. Please review our blog, YouTube, and Crushing Debt Podcast material about the Means Test in particular.
The third myth is that there is a minimum debt amount that is required to file bankruptcy. This is mostly false. There is no minimum debt amount required or recommended in order to file bankruptcy. Sometimes, it might be worth it to choose a route other than bankruptcy, if the debt is so low that it can easily be paid or an arrangement made with the creditor, but there is simply no minimum amount necessary to file a chapter 7 bankruptcy. We analyze the amount of the debt against the borrower’s income; someone with $20,000 in debt and an annual salary of $500,000 per year probably does not need to file, but that same $20,000 of debt to someone who makes $50,000 per year may be too high a burden to overcome outside of bankruptcy protection.
The last myth is that both spouses must file bankruptcy. Again, this is false because either spouse may file bankruptcy alone. However, if both spouses have joint debt, it’s a good idea for both spouses to file a liquidation bankruptcy so that they both get the relief of the bankruptcy stay and the bankruptcy discharge. If both spouses have joint debt and one files alone, that spouse’s obligation to pay the debt is eliminated; the non-filing spouse is still responsible to pay the debt in full. If one spouse is shouldering the burden of all of the debt, then it may be fine for that spouse to file alone.
Do you have questions about chapter 7 bankruptcy? For more information, please subscribe to the Crushing Debt Podcast, on iTunes, Stitcher, and GooglePlay. If you prefer, please contact us to schedule a free initial consultation to discuss your options at 727-261-0224 or email me directly at shawn@yesnerlaw.com.
Shawn M. Yesner, Esq., is the host of the Crushing Debt Podcast and founder of Yesner Law, P.L., a Tampa-based boutique real estate and consumer law firm that helps clients eliminate the financial bullies in their lives. We assist clients with asset protection, the sale and purchase of real property, Chapter 7 liquidation, Chapter 13 reorganization, bankruptcy, foreclosure defense, debt settlement, landlord/tenant issues, short sales, and loan modifications in Tampa, Westchase, Odessa, Oldsmar, Palm Harbor, Clearwater, Pinellas Park, Largo, St. Petersburg, and throughout the greater Tampa Bay area.
