If you are considering filing for personal bankruptcy in Florida, you have two primary choices: Chapter 7 or Chapter 13. Chapter 7 bankruptcy requires you to qualify through the means test. Not everyone qualifies for Chapter 7, but they can still file a Chapter 13 bankruptcy to reorganize their debts.
Qualifying for debt erasure through the means test
The Chapter 7 means test assesses your income, expenses and family size to determine whether you can repay debt with your current income. It has two parts to determine if you have any disposable income for paying off debts. The first part determines whether your income is below Florida’s median income. Most people pass the first part, so they don’t need to complete the second portion. If you must take the second half, you must submit documentation detailing your allowable expenses over the past six months. These are items such as rent, clothing, groceries and medical costs. What’s left after such expenses is the disposable income that you could use to pay off debt.
Chapter 7 is geared primarily toward those with mainly consumer debts like credit cards or medical bills. If you don’t pass the means test, the information from it plays a part in setting up a repayment schedule if you file Chapter 13.
Which chapter should I choose?
Assessing your options is a vital step when considering bankruptcy. Understanding the difference between the two types is necessary to make an informed decision. Not everyone is comfortable filing for Chapter 7, as they may want to keep possessions such as their home or an expensive car. However, Chapter 7 can liquidate your debts in as little as four months, giving you a quick jumpstart to turn around your financial life.
Chapter 13, on the other hand, involves no liquidation of assets but restructures debts, with payments occurring over three to five years. When you finish the plan, the remaining portion of many of your unsecured debts are discharged.