Florida residents dealing with overwhelming debt might want to consider bankruptcy. If you’re looking at your options, you should know whether it’s better to file Chapter 7 or Chapter 13.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy allows you to discharge your unsecured debts such as credit card bills, medical bills, personal loans and more. An automatic stay goes into place to stop your creditors from trying to collect.
Individuals with little to no assets who cannot pay back their debts are best suited to file for Chapter 7 bankruptcy. You’re also able to keep most property. However, the trustee assigned to your case will go through your nonexempt property and sell it so that the proceeds can go to your creditors if possible.
To be able to file Chapter 7, you must have an income low enough to pass the means test. In other words, if you earn too much money, you would not be eligible and would have to file Chapter 13 bankruptcy instead.
What is Chapter 13 bankruptcy?
Chapter 13 bankruptcy is a type of bankruptcy that’s better suited for consumers who are able to pay back their debts. It allows you to reorganize those debts to make it easier to pay back what you owe over a period of three to five years. You are typically able to keep your property with a Chapter 13 filing, including your home and vehicle.
Regardless of which type of bankruptcy you file, you cannot discharge certain secured debts. This includes things such as alimony, child support, student loans, taxes, car loans and mortgages.
Should you file Chapter 7 or Chapter 13 bankruptcy?
Whether you file Chapter 7 or Chapter 13 bankruptcy depends on your income and whether you are able to repay your debts. If you have a low income, Chapter 7 is likely the better option, but if you earn a higher income and only have issues repaying your debt in a shorter amount of time, Chapter 13 might be the right course of action for you.