I am thinking of filing for Bankruptcy in Florida, What are the differences between a Chapter 7 and a Chapter 13 bankruptcy?

I often get phone calls from people saying they need to file for bankruptcy but are unsure of which one.  Sometimes they do a little research online and tell me they want to file a Chapter 7, Chapter 13, or even Chapter 11, however usually these people have mixed up the definitions of each one.  Chapter 7 bankruptcy is referred to as  straight bankruptcy or bankruptcy liquidation while Chapter 13 is referred to as wage earners bankruptcy.  Here are some functions of each:

Chapter 7

  1. 90 day process start (filing) to finish (discharge or wipe out of debts)
  2. If you and your family (if applicable) make less than the median income for Florida you automatically qualify
    1. 1 person $40,029
    2. 2 people, $50,130
    3. 3 people, $54,594
    4. 4 people, $65,135
    5. 5 people, $72,635
    6. 6 people, $80,135
    7. If you make more than the median income for Florida, you can still qualify so long as you pass the means test.
    8. You make NO MONTHLY REPAYMENTS on your debt
    9. You may be able to keep all of your assets
    10. Your home is fully protected in a bankruptcy

Chapter 13 bankruptcy:

  1. If your income is above the median income and you don’t pass the means test then you will likely file a Chapter 13 bankruptcy.
  2. You will likely be able to keep all of your assets
  3. You will have to make monthly repayments to a bankruptcy trustee for either three or five years
  4. You can play catch up on secured debt
    1. If you are behind on your home you can catch up the payments over your payment plan
    2. If you are behind on your car you can catch up the payments over your payment plan
    3. You may be able to wipe out a 2nd, 3rd, home equity line of credit on your home.
    4. You may be able to reduce the interest payment on your car loan
    5. You may be able to reduce your car loan payment

Those are the main differences between a Chapter 7 and a Chapter 13 bankruptcy.  If you are thinking of filing for Bankruptcy then contact Shmucher Law, PL at 305.741.5553 or 954.309.5559.  We offer free consultations in Boca Raton, Fort Lauderdale, Miami, Plantation and Sunrise Florida.

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