Orlando residents who are considering filing chapter 7 bankruptcy should know the rules that apply to their financial transactions. Filing chapter 7 bankruptcy is based on a very simple agreement with the Orlando bankruptcy court: you will receive an almost immediate discharge of all your debts, in exchange for your agreement to surrender to the court your non-exempt property. Now, most people who are filing chapter 7 bankruptcy in Orlando do not have to surrender any property. That is because Florida law provides exemptions that protect the debtor’s property from having to be surrendered. Please read my other postings on this blog that discuss what you get to keep in a chapter 7 bankruptcy. However, for individuals and families that have more property than the exemptions allow, there are rules that apply to financial transactions that occur before filing chapter 7 bankruptcy. These rules are designed to prevent a person from “hiding” non-exempt property and then simply getting it back after bankruptcy to avoid having to surrender it to the court.
A bomb was dropped today on a roomful of Orlando bankruptcy lawyers who were attending the Central Florida Bankruptcy Law Association’s annual seminar. The newsflash deals with what mortgage companies are doing to snatch the homes of families who are seeking debt relief in chapter 7 bankruptcy court. It all has to do with the wildcard exemption. Let me explain.
Orlando home foreclosures and Orlando bankruptcies have been the subject of a lot of news. As with many topics of widespread interest, misinformation and myths have sprouted regarding what a bankruptcy can do for homeowners going through a mortgage foreclosure. Today, a very distressed couple consulted with me regarding their foreclosure. Their home was scheduled for a foreclosure sale in Lake county for the following day. They believed that filing for bankruptcy would help them save their home from foreclosure, even though they could not afford to make a monthly mortgage payment.
Keeping a car in a chapter 7 bankruptcy is often the biggest challenge for my clients, but it can be done and in fact it’s done all the time. Florida’s exemption law permits a debtor to claim only $1,000.00 in value for one motor vehicle in their bankruptcy. That’s what belongs to the debtor – the rest of the value of the vehicle belongs to the trustee, to sell to pay off creditors. Who drives a car that’s worth $1,000.00? This is a really stingy exemption, but there it is!There are several “tricks” for keeping a car in a chapter 7 bankruptcy. A debtor is entitled to use other exemptions that are available under the law to keep a car, such as the $1,000.00 personal property exemption. The debtor may also use the $4,000.00 “wildcard” exemption, but only if the debtor does not claim an exemption for homestead property. However, these exemptions must also be used to keep other personal property such as clothes, household furnishings, and other personal property. (In another post on this blog, I explain how the goal of a chapter 7 bankruptcy is to try to get all of your property “under the umbrella” of allowable exemptions.) If, after using all the exemptions available to a car owner, there is still value in the car that is not covered by exemptions (outside the umbrella), it will be considered “non-exempt” and it is available to pay creditors.At this point, the debtor has two choices: turn the car over to the trustee to be sold for the benefit of creditors. Or, you can make a deal with the trustee. Remember, in a chapter 7 bankruptcy, the trustee’s goal is to raise as much cash as possible to pay creditors. The trustee would rather have cold, hard cash than your property. If the trustee takes possession of your car, she needs to go through the trouble and expense of selling it to raise the cash. She would rather give you the chance to be the first buyer and take your money.Most chapter 7 trustees in Orlando give a debtor up to ten months to pay the value of their car equity in monthly installments. Some debtors get help from a friend or family member to pay off the value of their non-exempt car equity. A good bankruptcy attorney will help you negotiate the lowest dollar amount that represents the true value of your car.It hurts to have to buy your own car, but then, under the law, when you file chapter 7 bankruptcy, it really isn’t your car anymore.This is one of many ways that you can keep a car in a chapter 7 bankruptcy. If you are wondering how you can get debt relief, but still keep your car, contact my office to make an appointment for a free consultation to discuss your situation.
Keeping a car in a chapter 7 bankruptcy can be tricky. If you still owe money on your car loan, the lender has the right to re-possess your car if you stop making payments on the loan. Filing bankruptcy prevents the lender from taking any action repossess your car. However, after the bankruptcy is filed, the lender does have the right to ask the bankruptcy court for special permission to repossess the vehicle.