Understanding the differences between Ch. 7 and Ch. 13 bankruptcy in FL

Many people file for Chapter 7 or Chapter 13 bankruptcy as a way to get rid of uncontrollable debt and begin a new financial future.

Florida residents are not immune to the terrors of financial debt. From excessive credit card bills to costly medical expenses, many Americans simply cannot keep up with the unsurmountable financial burdens. As of September 2014, 725,308 people filed for bankruptcy across the country, which is the most recent information provided by United States Courts. In 2013, over one million people sought financial relief through bankruptcy. Chapter 7 was the most common type of bankruptcy, with over 728,000 filings in 2013. Over 333,000 people filed for Chapter 13 bankruptcy in 2013, putting it in second place. People who are interested in bankruptcy as a possible solution to ending their financial debt should learn more about these two common types of debt relief.

Chapter 13

People who are at risk of losing their home or other property because of their inability to make their payments may be eligible for Chapter 13 bankruptcy. According to the American Bar Association, Chapter 13 bankruptcy allows debtors to keep their property and establish creditor payments over the course of three to five years. Once those payments are resolved, many people are able to emerge debt-free and are able to begin rebuilding their credit.

People who wish to apply for Chapter 13 must complete a credit counseling course within 180 days of filing. They must also submit all of the proper paperwork, including a list of all creditors, expenses, income, property and assets. The trustee appointed to oversee the case will calculate the debtor’s disposable income by subtracting his or her living expenses from the total income. The debtor will be responsible for paying a percentage of the disposable income, which will go directly to the unpaid creditors.

Chapter 7

Chapter 7, or liquidation bankruptcy, is quite different from Chapter 13. People who qualify for this type of bankruptcy do not usually have any disposable income; therefore, much of the money owed to creditors will be totally eradicated once the bankruptcy is discharged. Debtors begin by taking the state means test, which determines whether or not their income is above the state median.

People who qualify for Chapter 7 bankruptcy must also take a credit counseling course. The trustee appointed to the case will evaluate whether the debtor has any property that can be sold. The cash obtained from selling the property is directly distributed to the unpaid creditors.

Legal assistance is essential

Going through the bankruptcy process can be extremely overwhelming. A bankruptcy attorney can provide vital legal assistance and walk you through the entire process. Not only will your attorney stop harassing creditors from contacting you, but they can ensure that your life gets back on track.

Keywords: bankruptcy, Chapter 7, Chapter 13

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Alvin S. GoldsteinAlvin S. Goldstein
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