An unincorporated territory of the United States, Puerto Rico is the place of the working man’s dreams. An ideal vacation spot, a haven for the overworked, and a sunny oasis for residents and vacationers alike, the collective islands of Puerto Rico seems like a place where nothing ever goes wrong.

However, many Puerto Rican residents struggle with the same money issues and financial problems that main-land United States individuals deal with. If you are suffering from the following debt problems:

• Foreclosure
• Vehicle or other property repossession
• Medical debts
• Personal loans
• Old tax liens
• Credit card debt
• Unemployment

You may qualify for a Chapter 7 bankruptcy. What will a bankruptcy do for you? It can allow you to get rid of nearly all of your debt. Also known as a liquid or “straight” bankruptcy, this Chapter was designed specifically for individuals and families who are struggling under the weight of too many bills.

Keep in mind that while a Chapter 7 bankruptcy can eliminate nearly all of your debt, there are some debts that will not be discharged. Those debts that stay with you regardless of your bankruptcy filing include:

• Certain tax debts (most recent ones)
• Alimony payments
• Child support dues
• Money owed to the court resulting from embezzlement or fraud charges

The Bankruptcy, Chapter 7 Process

There is a method to everything, and that includes the Puerto Rico bankruptcy process. Your first step in filing for bankruptcy is to meet with a qualified bankruptcy attorney. You are allowed to file on your own (called a pro se filing) but it is not recommended by the courts. Detailed paperwork, called a petition needs to be submitted to the bankruptcy courts. If submitted incorrectly you case could be dismissed without a discharge, or you could up accidentally commit fraud by withholding specific financial situation. Your best bet is to rely on a quality attorney for your Chapter 7 bankruptcy.

During your initial meeting your attorney will ask you questions about your financial situation. For the fastest processing, bring these items along with you:

• Last six months of pay stubs
• Last filed tax return
• A complete list of your creditors
• A list of your assets and property
• Information regarding judgments, liens, or garnishments

Get Your Bankruptcy Qualifying Tips Here, Puerto Ricans

Once you decide to file for bankruptcy, your attorney will need to determine if you qualify. There are two ways this can happen: measuring your income or passing the means test.

To qualify for a Chapter 7 bankruptcy you must fall at or below the median income level based on your family size. Currently the income levels are as follows:

• Single individual: $21,273
• Two members: $21,273
• Three members: $23,011
• Four members: $28,382
• More than four members: Debtors must add $7,500 per additional family member.

It’s important to note that these income levels change from time to time due to economic factors.

If you make more than the average level as a resident of Puerto Rico, the other way to qualify is through the means test. Your bankruptcy attorney will examine your financial information and enter it through a mathematical process. This method was instituted by the Bankruptcy Reform Act of 2005 and allows people who have an abundance of debt to still qualify for Chapter 7 bankruptcy who exceed the income limits. Discuss with your bankruptcy attorney to see if you qualify for Chapter 7; if you don’t you may be able to file for a Chapter 13.

You can Keep Your Slice of Heaven

Some call Puerto Rico a slice of heaven…but those filing for Chapter 7 bankruptcy may think that everything is at risk. The Bankruptcy Reform Act allows each state or in this instance, territory to claim certain assets exempt from bankruptcy. Residents of Puerto Rico also have the option of using federal exemptions to allow for greater customization in a bankruptcy petition.

Territorial exemptions include:

• Homestead: For a primary residence up to $15,000 in value is exempt.
• Vehicle: 100%
• Household goods:
• Chairs, tables, desk and books: $100
• Bed, bedding and other related furniture: $200
• Clothing, pictures, and one month’s worth of food: 100%
• Iceboxes, kitchen appliances, iron: 100%
• Washing machines: $200
• Farming equipment and goods – includes 100% of the following:
• One cow and calf
• One hog and suckling pigs
• Farming implements
• 2 horses
• 2 oxen
• 2 mules
• Benefits – includes 100% of the following:
• Benefits paid under Automobile Accident Social Protection Act
• Workers' compensation benefits
• Workers' compensation disability benefits
• Police and fire retirement
• Fraternal benefit society benefits
• Unemployment benefits
• Federal civil service retirement benefits
• FEMA benefits exempt from garnishment
• Military Survivor Benefit Plan annuities
• Other additional exemptions:
• 100% Seal of notary public
• 100% Uniforms, arms and accoutrements required by law
• 100% One gun
• 100% Public buildings and property
• 100% Railroad unemployment insurance
• 100% Wages of seamen while on a voyage

These exemptions and the amount available to keep can change to reflect current economic conditions. For a complete list of what exemptions are available to you, talk to your bankruptcy attorney.

Turn your life back around. Don’t let the joys of living in Puerto Rico be hindered by the weight of debt. You can provide the money your family needs to survive without the hassle of creditors banging down your door. Talk to a local bankruptcy attorney today. 

Puerto Rico Bankruptcy Courts

Luis A. Ferre United States Courthouse
and Post Office Building
93 Calle Atocha, 2nd Floor
Ponce, Puerto Rico 00730-3078
Phone: (787) 812-2212

Jose V. Toldo Federal Building and
United States Courthouse
300 Calle De Recinto Sur
San Juan, Puerto Rico 00901