Bankruptcy laws in some form or fashion have been in place in the United States for over 200 years. Our Constitution even addresses the subject of bankruptcy, and Congress has passed the Bankruptcy Code. Florida and every other state has at least one judicial district established for bankruptcy. While the law details six basic types of bankruptcy, two types are more common for individuals in the midst of financial difficulties. These are Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Chapter 7 bankruptcy is also referred to as a liquidation proceeding since the non-exempt assets in a filer’s estate are liquidated into cash, then distributed to creditors. Certain exempt assets may be retained, according to the laws of the state where the filer resides. However, a “means test” must first be passed in order to qualify for Chapter 7 bankruptcy. Relief may not be available if the filer’s income level is over a certain level.
Chapter 13 bankruptcy can help an individual retain assets since a repayment plan can be established, though it will first have to be approved by the court. This is type of bankruptcy is beneficial for those with regular income who are able to repay their debts over a specified period of time. Homes and other assets that might be lost in a Chapter 7 filing can be saved in a Chapter 13 bankruptcy. Failure to meet the terms of the plan could result in dismissal of the bankruptcy.
Figuring out what type of bankruptcy to file can be confusing while dealing with financial hardships. Florida residents who are contemplating this decision will benefit by consulting an attorney familiar with these types of proceedings. A lawyer can help determine whether Chapter 7 or Chapter 13 bankruptcy is the right choice and offer ongoing support and assistance in achieving lasting debt relief.
Source: journalreview.com, “Explaining bankruptcy law for debtors”, Stu Weliever, Dec. 29, 2016