A Chapter 7 Bankruptcy is also known as a liquidation bankruptcy. The debtor seeks to discharge or eliminate all dis-chargeable debts. These debts usually include credit cards, medical bills, signature loans, repossessions, household bills, and other unsecured debts.  A Means Test is used to determine if the debtor is eligible to file Chapter 7.

For the debtor to file a Chapter 7 bankruptcy, his household income must be below a certain income level.  The household income level is set by the federal government and normally is adjusted yearly. If a debtor exceeds the allowable income for his family size, as determined by the Means Test, he may not qualify for a Chapter 7 Bankruptcy.  A Chapter 13 Bankruptcy may an option if a debtor is not eligible to file Chapter 7.

Debtors are allowed to keep “exempt” assets in their bankruptcies.  Exempt assets are usually determined by the state you reside in.  Florida is a leader in homestead property rights.  If a debtor owns homestead property in Florida, he may retain the homestead property and all the equity in that property. If the debtor retains the homestead property in Florida, his exempt assets may also include  $1,000.00 in personal property as well as $1,000.00 equity in a vehicle.  The debtor would need, however,  to make the monthly mortgage payments, if any, on the homestead property to keep it.

If a debtor decides to surrender assets such as a home  or a vehicle, he may do so in full satisfaction of the loans held against those assets through the Chapter 7 Bankruptcy.