There are certain income requirements to file a Chapter 7. That amount typically adjusts for inflation twice per year. That amount varies based on your household size and by state.
In the State of Florida the amounts are as follows:
One person household: $60,429
Two-person household: $74,131
Three-person household: $83,396
Four-person household: $100,476
Five-person household: $110,376
Six-person household: $120,276
Dependents in your household include children under the age of 18. If custody is split, we usually factor in how much time the child spends at your residence and how many children there are. If custody is split 50/50 and there are two children, we would list a two-person household. Children under the age of 24 that are in school full-time can also be considered dependents or any disabled children. If there are elderly parents living in the household, they can be considered in the household size or any other relatives. However, if any person is included in the household size, we need to include their income and expenses as well. Social security does not count towards the income amount.
If you are still over that amount, there is still a potential you could qualify for a chapter 7 if you “pass” the long form of the means test. The means test is required for all those debtors who are over the “median”. The test determines your eligibility for a Chapter 7 or the amount of your plan payment in a Chapter 13. It uses some of your actual expenses and some expenses are determined by the IRS guidelines based on your household size and county where you reside. It can get a bit complicated, so it is good to consult with a bankruptcy attorney to guide you through the process.
There are situations that arise where a potential debtor inherits property. Let’s say for example, a house is inherited that is worth 200,000 and its devised in the will to all four surviving children so each child has a 25% interest/$50,000 interest in the property.
The first issue to determine is who resides on the property. If the debtor is living in the property than it can be exempted as homestead. If another relative is living in the property and the debtor has another residence, then the trustee does have an interest in the debtor’s proportionate share.
Typically, the trustee will try to have the other owners buy out the debtor’s portion. In this case, the trustee would likely try to see if the other three siblings could put in 50K to buy out the debtor. They would have to figure out how to finance or fund that $50,000 on their own to pay the trustee.
If those three siblings did not have the financial ability to provide those funds to the trustee, the trustee would have the option to sell the property and distribute the proceeds. It is usually best to resolve these issues prior to filing your bankruptcy.
If you do receive an inheritance six months after filing your bankruptcy case then you are obligated to notify the trustee. Anything that is inherited (personal property, jewelry, real estate, liquid cash and/or stocks) would have to be turned over to the trustee.
If the inheritance is more than the amount of your unsecured debt, then you would receive the balance of proceeds. The trustee cannot take more than you owe your creditors (less a small trustee fee to administer the case).
With home ownership and rental costs on the increase, many people are choosing alternatives such as residing in a mobile home, RV or houseboat. When it comes to filing for bankruptcy we always need to analyze if your property is exempt from the trustee. Ordinarily anything recreational such as an RV, boat, jetski, etc. would be considered a luxury item that would not be exempt.
Florida law has established certain criteria for determining if an RV or boat qualifies as homestead. There is a six-prong test used by the courts to determine the abode is exempt:
Debtor’s intent to make a non-traditional abode his homestead.
Whether the debtor has no other residence.
Whether evidence establishes continuous habitation. Are you going back and forth between a house up north then coming back and using the RV temporarily or is it a permanent home?
Whether the debtor maintains a possessory right associated with the land establishing a physical presence. For example, renting a lot to keep the RV parked.
Whether the non-traditional abode has been physically maintained to allow long-term habitation verses mobility. Is the RV taken on vacations or is it parked and set up with utilities.?
Whether the physical configuration of the abode permits habilitation. If it is set up for full-time use for example, it has a bathroom, kitchen, etc.
Florida has a specific exemption for mobile homes. Please reach out if there is any question on whether your property is exempt.
It is quite a bit of work for both the client and our office to make sure we have all the proper documentation to analyze your case and prepare the bankruptcy petition. The bankruptcy petition is not a “simple” or “basic” form. Clients are surprised to learn that the petition is between 50-60 pages. It has to be filled out accurately and completely.
There is a burden on both you as the client, as well as myself, as the attorney to do our due diligence to make sure we do not miss any information. We need six months of payroll, or if self-employed, you would need to provide six months of profit and loss statements by month; two years of income tax returns; two years of corporate returns if you own a business; vehicle titles and/or car registrations; identification, three months minimum of all bank statements for every account, including retirement accounts such as IRAs, ESOP plans, FRS plans if working for the government.
If you are on social security we need the social security benefits letter confirming your monthly payment. The same is true for pensions, annuities, or veterans benefits to confirm the amount of your monthly payment. Additional information that we may need to review are: a martial settlement agreement if you have been divorced within the last two years, payoff statements for your mortgage and vehicles, paperwork for any lawsuits, deeds to any real property, trust documents, HUD or bill of sale for any home or vehicle sales or trade ins for the last two years.
We also need information regarding the value of all of your assets and we go through questions also to make sure you are an eligible bankruptcy candidate. That is why people hire an attorney. It can definitely be a daunting task without help. There are many aspects of analysis to evaluate if you have non-exempt property, is there anything the trustee could make you pay back such as insider payments to family members, or friends. Having legal guidance will prove to be valuable and make the process go much more smoothly.
There is no minimum threshold amount of debt to be able to file for bankruptcy. My personal recommendation is that it’s probably not worth it for a debt amount under $5,000. If you have debt over $5,000, your minimum monthly payments are causing you a hardship, and you have been paying high interest and minimum payments with little, or no progress in reducing the principal amount of the debt you are a potentially good bankruptcy candidate.
There is no maximum amount of debt to file a Chapter 7, so that amount can be unlimited. If you have hundreds of thousands of dollars in debt, be assured that the trustee will ask how that money was spent. Some people have over hundred thousand dollars just in student loan debt alone. Even though there is no debt limit to file a Chapter 7, there are income requirements which should be addressed during your consultation. Our first analysis is whether you will qualify for a Chapter 7.
There are caps on debt in a Chapter 13 case which might seem illogical because you are actually paying your creditors, through the trustee for 36-60 months and in a Chapter 7 you are not making a monthly payment to the trustee. For a Chapter 13 you are permitted to have $465,275 in unsecured debt. Unsecured debt includes credit cards, personal loans, medical debt, and student loan debt.
You are allowed to have up to $1,395,875 in secured debt which would include items such as a home mortgage or financed vehicle.
