There are many reasons why you may choose to file Chapter 13 instead of Chapter 7 bankruptcy:
- You may not qualify for Chapter 7 under the means test.
- Filing Chapter 13 may allow you to protect assets you would
otherwise lose by filing Chapter 7.
- Chapter 13 bankruptcy gives you more time to catch up on mortgage
payments to prevent a home foreclosure.
- There are some tax debts you can discharge in a Chapter 13
that can’t be discharged in Chapter 7.
Creating a Debt Repayment Plan
Under your Chapter 13 bankruptcy payment plan, you will agree to pay back a percentage of your secured debt over a three to five year period. Secured debt is debt backed by certain property, such as your home and your car.
After you and our lawyer have determined a budget, you will pay back a percentage of your unsecured debt such as credit card bills, lawsuit judgments, payday loans and hospital bills. This percentage will be determined by how much you can afford to pay. Chapter 13 bankruptcy plan is a form of debt consolidation, as you will make one payment to the bankruptcy trustee, who will them pay your creditors. At the end of the payment plan, remaining unsecured debts will be eliminated and you will be up to date on your secured obligations.
What Are the Other Benefits of Chapter 13?
Filing Chapter 13 bankruptcy puts an immediate stop to:
- Home Foreclosure
- Wage Garnishment
- Harassment by your creditors
The first part of the means test is simply a comparison: How does your household income compare to the median income in Florida for a family the same size as yours? On March 15, 2014, the U. S. Department of Justice released its official annual adjusted median income data. In Florida, the median income data is:
- $40,029 for a household of one
- $50,130 for a household of two
- $54,594 for a household of three
- $65,135 for a household of four or more
In the second part of the means test, certain expenses are deducted (subtracted) from your gross income to arrive at your disposable income. If your projected disposable income for the next five years is less than $100 a month ($6,000 total), you most likely pass the test and are eligible to file for Chapter 7. If your disposable income projects to be more than $10,000, you likely will not be eligible.
Most people who file bankruptcy do so to discharge their debts. A discharge is a court order, which states that you do not have to pay a debt.
Some debts virtually cannot be discharged. For example, you typically cannot discharge debts for:
- Most taxes
- Child support
- Student loans
- Personal injury lawsuit judgments caused by driving under the influence of drugs or alcohol.
Discharge of debts through bankruptcy only applies to debts that arose before the date you filed. Also, if the judge finds that you received money or property by fraud, that debt may not be discharged.
You can only receive Chapter 7 bankruptcy once every eight years. No one can make you pay a debt that has been discharged, but you can voluntarily pay any debt you wish to pay. You do not have to sign a reaffirmation agreement or any other kind of document to do this.