Thousands of Florida residents struggle with debt and financial issues, and sometimes there’s simply no way out or the debt spiral. In those cases, bankruptcy may be the best option for resetting your personal finances.
But if you’re contemplating bankruptcy, it’s important to understand the details surrounding the process. There are a number of limits, rules and restrictions involving debt settlement and bankruptcy.
What is Chapter 7 bankruptcy?
There are two major kinds of personal bankruptcy – Chapter 7 and Chapter 13 bankruptcy.
Chapter 13 bankruptcy involves a court-mandated plan for paying back some or all of your dept. Chapter 7, in contrast, releases you from nearly all of your debt without the obligation to pay it off. As a result, Chapter 7 is the better option if your financial situation is especially dire.
Limits of Chapter 7 bankruptcy
While Chapter 7 bankruptcy may be your best vehicle toward getting out of debt, be aware that there are restrictions and limits to the process.
First of all, Chapter 7 bankruptcy cannot absolve all debts. Notably, the following debts are exempt:
- Most tax debt
- Alimony and child support payments
- Any fines and injury payments due to DUI
- Court fines in general
- Student loan debt, though this debt could be discharged through a separate bankruptcy proceeding
A crucial point about Chapter 7 bankruptcy is that, in order to discharge your debts, you’re required to forfeit nearly all your major personal assets. While you can keep certain assets necessary for your life and livelihood, the courts will liquidate the rest to address your debts.
Finally, there’s a waiting period after filing bankruptcy before you can file again. With Chapter 7 bankruptcy, you must wait at least eight years before another Chapter 7 filing. However, there’s no limit to how many times you can file for bankruptcy.
Chapter 7 bankruptcy can be a powerful tool for relieving severe debt problems. But if you’re considering Chapter 7 bankruptcy, it’s important to understand the limits of the process.
