How to Conduct a Successful Liquidation Bankruptcy
One of the most widely circulated myths about Chapter 7 bankruptcy is that anyone who pursues this type of debt relief will end up losing everything. This is not true, but it is based on an underlying fact. Chapter 7 is frequently referred to as liquidation bankruptcy because the process includes the appointment of a bankruptcy trustee who attempts to sell off as much of the debtor's personal property as possible. Any funds raised are used to pay back the creditors whose debts would otherwise be discharged at the end of the process. Don't let this scare you away from filing for bankruptcy under Chapter 7. The truth is that the vast majority of Chapter 7 bankruptcies are no-asset cases, meaning that there is very little chance that you will lose anything.
The reason that most people who declare Chapter 7 bankruptcy are able to keep most or all of their property and assets is that federal and state law provides numerous exemptions which can be claimed to limit the reach of the bankruptcy trustee. In many states it is possible to choose between the federal and state exemptions, but in Florida you can only use the state exemptions. This actually works in your favor, as Florida has some of the most generous exemptions in the country, such as:
- Unlimited homestead exemption for any equity you have in your home, provided that you own no more than half an acre within a municipality or 160 acres elsewhere
- Up to $1,000 in personal property
- Wage exemption for the head of household, up to $750
- Up to $1,000 of any equity you have in your vehicle if the car loan is not upside-down
- Pensions
- College funds
- Alimony and child support
- Workers' compensation and other insurance benefits and annuities
Many people choose to waive the homestead exemption, and they do so without any fear of losing their houses. Nearly half of all mortgages in Florida are “underwater,” meaning that the homeowner owes more on the mortgage than the house is worth. When this is the case, or even if the homeowner has a small amount of equity, the bankruptcy is unlikely to attempt to liquidate the property. After the real estate expenses, escrow fees and closing costs, there would be little or nothing left to pay the creditors. By waiving the homestead exemption, it is possible to boost the personal property to $4,000 for an individual or $8,000 for a married couple.
How a Gainesville Bankruptcy Attorney Can Help
At The Law Offices of Justin McMurray, P.A., we have more than a decade of experience and have assisted countless clients with the process of declaring bankruptcy. A Gainesville bankruptcy attorney from our firm can help you take full advantage of all available exemptions to safeguard your personal property and ensure that you are able to begin your life after bankruptcy without having to make unnecessary sacrifices.