The simple answer to that question is that it depends on your circumstances. The primary reason that many Florida residents file for Chapter 13 bankruptcy (reorganization) over a Chapter 7 (liquidation) is that they want to retain as much of their property as possible that would not necessarily be considered exempt under a Chapter 7. It also might be possible to discharge debts that would not otherwise be eligible under the other chapter.
In a Chapter 13 bankruptcy, the filer proposes a repayment plan that must be approved by the court. Once that occurs, the filer’s disposable income is paid to the trustee on the case who then distributes it to creditors in accordance with the plan. How long the plan lasts often depends on whether your income is above or below the median income for Florida. If you are above that number, the plan will usually last five years or 60 months. For those who are below the median, the plan generally last three years.
You must have sufficient income to complete the plan in order to file under Chapter 13. The plan can provide for the payment of secured debts, unsecured debts and debts that are not otherwise dischargeable, such as child support and student loans. When the plan is complete, it might be possible to discharge debts that would not be eligible under Chapter 7.
Deciding whether to file for Chapter 7 or Chapter 13 bankruptcy is not always up to the filer because the means test might not provide an option. However, when there is an option, it is important to consider all of the relevant factors before making a decision. Your attorney can help you make this crucial decision and can then help you through the process in order to give you the best opportunity for a fresh financial start.