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How Does Bankruptcy Work?

Written on November 6, 2019

In sum, Chapter 7 bankruptcy is a legal proceeding where a consumer can discharge many forms of unsecured debt after liquidating eligible assets to pay off creditors. In the Florida business environment, you may encounter this form of bankruptcy in one of two ways:

  1. You’re a creditor seeking payment from a debtor who’s filing Chapter 7, and your bottom line is at stake; OR,
  2. You’re a company owner – especially a sole-proprietor – wanting to eliminate some of your personal and professional debts.

A Clearwater, FL business lawyer can assist with either situation. Each of these scenarios puts you in a very different position comparatively, so it’s critical to understand the requirements, process, and consequences. In addition, some basic information about Chapter 7 bankruptcy may be useful.

Overview of Chapter 7 Bankruptcy Proceedings:

For individuals who qualify, Chapter 7 of the US Bankruptcy Code can wipe out most forms of financial liability, enabling them to emerge from the process debt-free. When the petitioner files the relevant paperwork, the court imposes an automatic stay that applies to creditors. They cannot attempt to collect on any debt and are prohibited from:

  • Calling the debtor to request payment;
  • Initiating collection efforts;
  • Filing a lawsuit in court to recover the debt;
  • Putting a lien on property;
  • Garnishing wages; and,
  • Any related conduct.

Shortly after filing, a bankruptcy trustee is assigned to the case to manage the debtor’s assets, with a goal to liquidate property and pay off creditors. Whatever amount the trustee collects goes to creditors, though it may not be enough to satisfy all debts. Some assets are exempt, as described in more detail below; other property may not bring much value to pay the debtor’s outstanding accounts. Any remaining debts, after application from funds collected in liquidation, are discharged at the conclusion of Chapter 7 proceedings.

Exemptions in Chapter 7 Bankruptcy Cases:

Bankruptcy laws don’t want to leave the petitioner in a destitute situation, so the trustee cannot take control over the exempt property and attempt to liquidate it for Chapter 7 bankruptcy purposes. As such you may be allowed to keep certain assets or equity in them. Some examples of exemption under Florida law include:

  • The homestead exemption, which includes equity in real estate or personal property that you use as a residence;
  • Up to $4,000 in any property of your choice, if you don’t use the homestead exemption;
  • Up to $1,000 in a motorized vehicle;
  • Such personal property as prepaid health and medical savings accounts;
  • Federal income tax refunds;
  • Some of your wages, depending on whether you’re the head of the household;

Discuss Chapter 7 Bankruptcy with a Clearwater Business Lawyer

If you’re considering Chapter 7 bankruptcy or are involved with proceedings as a creditor, please call (727) 785-5100 to reach the offices of Clearwater Business Law. We can set up a consultation to review your circumstances and advise you on the best way to move forward. Our firm represents clients throughout Pinellas County, FL in a range of business and consumer matters, and we’re happy to help.


I strongly endorse Andrew Mongelluzzi. He is a very skilled and able business attorney focused on customer service and results. On the front end, Andrew deftly advises new businesses on organizing properly, acquiring necessary licenses, contracting with vendors & customers, and dealing with various compliance issues that may arise. On the back end when things go south, Andrew counsels and navigates businesses through complex commercial disputes and aggressively represents them in negotiations, mediation, arbitration, and in litigation so that businesses can legally move on and get back to business. Andrew’s ability to identify legal issues and approaches to resolve business-related issues is a strength that I have learned from and professionally relied upon in approaching the business matters and cases that I handle. I regularly refer business to Andrew knowing that he will diligently represent his business clients and their best interests.
Relationship: worked together on matter

- Frank N. Genco, Florida Bar No. 440086

Attorney Mongelluzzi and his team provided excellent and quality service. I always felt that my needs were met and that the firm was invested in me and my case. The quality services I received at Mongelluzzi’s firm were remarkable. From the initial meeting they were responsive to my calls, questions and concerns. All issues were handled professionally and timely, easily accessible, got back to me quickly, aggressive and got me the results that I wanted. Attorney Mongelluzzi and his staff all gave my case their personal attention and provided the quality of work that anyone would want when hiring an attorney.

- Client

Andrew is very thorough defining the outcome expectations. In my case, it was setting up a new corporate entity. He advised me on the most beneficial option and he then executed on that path. Andrew is a very pleasant person to work with. He is determined, skilled and committed to his client’s success.

- Gil Pinney

Andrew helped me through a difficult situation with American Express and we won the case. A great job by Andrew! He also helped me with T&C’s in my company. I would recommend Andrew highly as an attorney.

- John Sams

As a business owner for 12 years I have seen my fair share of ups and downs. Some of the downs would include landlord/tenant disputes and creditors that may have not been fulfilled to agreement. Andrew has met both of these situations for me in a timely, positive, and affordable manner.

- Rich Mattes

It was very nice to have a lawyer who not only is fierce in negotiations but has been successful in business. This is a lethal combination. I was glad he was on my side.

- Nigel Castanheiro

Andrew helped me with a contract litigation case. The lawyers battled it out for over a year and we finally got a reasonable settlement offer. Then the other side tried to back out. Andrew figured out how to force the other side to honor the deal and really knows his way around the court system. Definitely feel comfortable using him again.

- John Ellis


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