Many Florida residents struggle with debt they find unmanageable. In this situation, you might want to file for Chapter 7 bankruptcy. However, you need to know how to qualify.
Understanding Chapter 7 bankruptcy
With Chapter 7 bankruptcy, individuals with debt can get a second chance to get control over their finances. Filing allows you to have many of your unsecured debts such as credit card debt, personal loans and medical bills discharged by the court. Although secured debts cannot be discharged, Chapter 7 bankruptcy can help people get back on their feet financially.
Qualifying for Chapter 7 bankruptcy
Not everyone can qualify for Chapter 7 bankruptcy. Only those who can pass the means test can file. The test looks at a person’s financial situation to determine whether or not they could potentially pay back their debts. This involves examining the person’s expenses and income over the past six months and determining their disposable income. If the amount is too high, the individual would have to file for Chapter 13 instead of Chapter 7 bankruptcy.
The reason behind the means test is to ensure that bankruptcy candidates can afford to pay back their debts over an extended period of time or if that would be impossible due to hardship. If a person does pass the means test, they are eligible to file Chapter 7 bankruptcy.
When should you file for Chapter 7 bankruptcy?
If all other options have failed in trying to pay back your creditors, Chapter 7 bankruptcy may be your last resort. Having unsecured debts that are more than half your annual income is a good indication that filing could help you alleviate your burden. If creditors and collection agencies continuously try to contact you and harass you to recover debt, Chapter 7 bankruptcy is appropriate.