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Those looking to file Chapter 7 bankruptcy must pass a means test

On Behalf of | Apr 12, 2018 | Chapter 7 Bankruptcy, Firm News

Chapter 7 bankruptcy is called the liquidation chapter in Florida and elsewhere. The name is deceptive because filers generally keep their personal belongings and furnishings due to state exemptions. With respect to real estate, the state has one of the more liberal exemption laws, which allows for an unlimited homestead exemption under certain circumstances. The best way to determine whether one qualifies for the unlimited homestead exemption is to obtain a consultation with an experienced Chapter 7 bankruptcy attorney.

In many states, a debtor may choose to assert either the federal bankruptcy exemptions or the state exemptions. In Florida, however, only the state exemptions are available. An experienced bankruptcy attorney will guide the client through the exemptions so that most or all personal possessions are retained. The reason why Chapter 7 is preferable for most consumer debtors is that it provides a discharge for all unsecured debts.

Thus, in a Chapter 7 bankruptcy, the consumer can eliminate quickly and forever a large amount of credit card debt, hospital bills and personal unsecured loans. This is generally referred to in bankruptcy parlance as getting a fresh start. However, under the current bankruptcy laws not everyone is qualified to file.

An individual or married couple in Florida and other states must qualify to file a Chapter 7 bankruptcy under the “means test” which measures their income against the median income reported for the state of filing. This generally means that persons of limited means will qualify for this powerful relief, but people who make higher-than-average incomes may find it difficult to qualify. The purpose of these laws, which were passed by the United States Congress in 2005, is to encourage people with higher incomes to file for Chapter 13 relief. In Chapter 13, the filers pay some or all of their debt in a monthly payment plan that extends for three to five years.

Source:, “What Is Chapter 7 Bankruptcy?“, Carla Fried, April 4, 2018

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