Bankruptcy is serious stuff, and complex too.  A debtor deciding whether or not to declare bankruptcy likely has some idea of the benefits and probably knows a bit about the riskier factors.  Filing will affect your future credit, and your purchasing options.  It can however, improve your short-term quality of life considerably by freeing you from harassing creditors.

But did you know there are options in filing for bankruptcy?  An experienced bankruptcy lawyer in your area (Miami-Dade, Broward, or Palm Beach County) is a necessary guide, because the journey from declaring bankruptcy to post-bankruptcy financial health is not a journey to undertake alone.

Let’s start with a preliminary and skeletal understanding of bankruptcy itself.  In a chapter 7 bankruptcy case, the debtor is allowed to retain all the property they own that is “exempt.”  The Florida law determines how much real estate and personal property a debtor may retain as exempt property.   All non-exempt property owned by the debtor is sold by a bankruptcy trustee and the proceeds of the sale are given to the creditors.

Chapter 7 bankruptcy requires that your income be below the state median for a family of similar size. Under certain circumstances, you may also file Chapter 7 bankruptcy if your income is above the state median but that income is insufficient to work out a repayment plan as required when filing Chapter 13 bankruptcy (discussed below).  Chapter 7 debtors who are assisted by their bankruptcy lawyer, may be able negotiate with the trustee and pay an amount sufficient to settle the trustee’s claim while allowing the debtor retain the non-exempt assets.

Your bankruptcy attorney should advise you that if when a debtor has primarily consumer debt, they must complete a “Means Test”, which takes into consideration the debtor’s income for the six months prior to the bankruptcy filing along with certain allowable expense deductions.  A debtor who passes the Means Test is eligible to file Chapter 7 bankruptcy whereas a debtor who fails the Means Test is required to file Chapter 13 bankruptcy.

Chapter 13 is a reorganization bankruptcy designed for debtors with regular income who can pay back at least a portion of their debts through a repayment plan. If you make too much money to qualify for Chapter 7 bankruptcy, you may have no choice but to file under Chapter 13.

Chapter 13 gives you a chance to pay a portion of your debts back under a structured repayment plan.  Your experienced bankruptcy attorney will advise you that Chapter 13 is the best option to stop repossessions and foreclosures.

A chapter 13 debtor will exhibit the following characteristics.

  • Stable income
  • Ability to commit to a long term financial plan

A Chapter 13 plan requires a debtor to stay on a cash budget for a 3 to 5-year time period. Some debtors can handle that responsibility easily, while others find it difficult to stick with a plan that requires such discipline.  Your bankruptcy attorney will want to investigate each of the aforementioned characteristics and determine where you, the debtor, stands in comparison.  The stability of a debtor’s income can appear in practice like future-casting, and resemble guess work based on the debtors past financial history.  However, the best candidates/debtors will demonstrate a consistent work history and/or be persuasive about their future job prospects.  Your Attorney will use both subjective and objective analyses to determine your qualifications.

It is important for your bankruptcy attorney to have a frank and honest discussion with the debtor to determine whether Chapter 7 or Chapter 13 contains the best means of protection for you.