Many Florida consumers quietly deal with an unwanted burden — overwhelming debt. This can make every aspect of life more difficult, and it often weighs heavily on people’s mental health. However, for many people, Chapter 7 bankruptcy can be a smart, financially safe option.
In 2005, the Bankruptcy Prevention and Consumer Protection Act went into law. Although the name seems positive, it can actually make it more difficult for those who need debt relief. Because of this act, those in need of debt relief must undergo six months or more of credit counseling before they even file for bankruptcy. Once the Chapter 7 filing is in, the debtor must then participate in a course for financial management. Although there is certainly nothing wrong with educating consumers on financial matters — indeed it may help many people — requiring debtors to do so at the cost of delaying debt relief may be overwhelming.
This new act also brought in the means test. The means test compares a person’s average income from the six months prior to filing and compares it to the average for the state. Anything under the average means a person has passed the means test and may continue with Chapter 7. Anything above the average makes things more complicated, and includes considering the person’s income, allowable expenses and projected net income for fives year in the future. Those who pass the means test in this method can still pursue Chapter 7, and those who do not must instead pursue Chapter 13.
Chapter 7 bankruptcy is preferred by most Florida debtors as it provides more immediate relief from debt, whereas Chapter 13 requires a repayment plan before discharge. However, both ultimately provide the same outcome — debt relief. Individuals who are unable to pay their bills and cannot stop creditors from calling should consider the potential benefits of pursuing bankruptcy.