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Chapter 7 & 13 Bankruptcy

Chapter 7 or Chapter 13 Bankruptcy:

Means Test Chapter 7 Qualification:

If you would like to file a Chapter 7 bankruptcy you must pass the means test. The test only applies to higher income filers which means that if your income is below the Florida median for your household size you are exempt from the test and may file a Chapter 7.

If your income is higher than the Florida median you will need to complete the means test calculation to determine if you can pay back a portion of your unsecured debts through a Chapter 13 bankruptcy.

Means Test Exemptions:

If your debts are not primarily consumer debt, then you are exempt from the means test. You are also exempt from the means test if you are a disabled veteran and incurred your debt primarily during active duty or performing a homeland defense activity.

If your currently monthly household income is less than the Florida median income for a household of your size, there is a presumption that you pass the means test and are eligible to file a Chapter 7 bankruptcy.

Your average household income is determined by averaging your monthly income over the last six calendar months. Once you determine your average monthly income you multiply that by 12 to determine your annual income for the purpose of median income test.

1 Member Household - $41,334.00
2 Member Household - $51,839.00
3 Member Household - $53,952.00
4 Member Household - $63,196.00
5 Member Household - $71,296.00
6 Member Household - $79,396.00
7 Member Household - $87,496.00
8 Member Household - $95,596.00
9 Member Household - $103,696.00
10 Member Household - $111,796.00

Advantages to a Florida Chapter 7 filing
  1. You receive a complete fresh start. After the bankruptcy is discharged the only debts you owe will be for secured assets on which you choose to sign a “Reaffirmation Agreement.”
  2. You have immediate protection against creditor's collection efforts and wage garnishment on the date of filing.
  3. Wages you earn and property you acquire (except for inheritances) after the bankruptcy filing date are yours, not the creditors or bankruptcy court.
  4. There is no minimum amount of debt required.
  5. Your case is often over and completely discharged in about 3-6 months.

Disadvantages to a Florida Chapter 7 filing

  1. You lose your non-exempt property which is sold by the trustee. If you want to keep a secured asset, such as a car or home, and it is not completely covered by your Florida Exemptions then Chapter 7 is not an option.
  2. If facing foreclosure on your home, the automatic stay created by your Chapter 7 filing only serves as a temporary defense against foreclosure.
  3. Co-signors of a loan can be stuck with your debt unless they also file for bankruptcy protection.
  4. If you filed a prior case and received a discharge of your debts, you can only file a second Chapter 7 bankruptcy case eight years after you filed the first case.

Advantages to a Florida Chapter 13 payment plan

  1. If you choose and you can afford the payment plan, you can keep all your property, exempt and non-exempt.
  2. While debts are not canceled as in a Chapter 7 discharge, they can be reduced under a Chapter 13 payment plan.
  3. You have immediate protection against creditor's collection efforts and wage garnishment.
  4. More debts are considered to be dischargeable, (including debt you incurred on the basis of fraud and credit card charges for luxury items immediately prior to filing).
  5. If the Chapter 13 plan provides for full payment, any co-signers are immune from the creditor's efforts.
  6. You have protection against foreclosure on your home by your lender as long as you meet the terms of the plan.
  7. You have more time to pay debts that can't be discharged by either chapter, such as back taxes and child support.
  8. You can file a Chapter 13 at any time.
  9. You can file repeatedly.
  10. You can separate your creditors by class where different classes of creditors receive different percentages of payment. This enables you to treat debts where there is a co-debtor involved on a different basis than debts incurred on your own.

Disadvantages to a Florida Chapter 13 payment plan

  1. You create a payment plan where you use your post-bankruptcy income. This ties up your cash over the Chapter 13 plan period.
  2. Legal fees are higher since a Chapter 13 filing is more complex.
  3. Your plan and therefore your debt will last for 3 to five years.
  4. You are involved in the bankruptcy court process for the term of the 3-5-year plan.
  5. Stockbrokers, and commodity brokers cannot file a Chapter 13 bankruptcy petition.

Contact us

John P. Rutkowski, Attorney at Law, is focused on all aspects of Wills, Trust, Probate, Foreclosure, Bankruptcy, Divorce & criminal law. Contact me today to schedule an initial consultation.

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