Individuals may require the services of a bankruptcy attorneys for more than just filing a Chapter 7 or Chapter 13 bankruptcy petition. In fact, our Florida bankruptcy law firm generally walks our clients through a checklist that helps them evaluate the advantages and disadvantages of a bankruptcy filing, including other strategies for managing debt.
Our attorneys caution that an individual’s unique financial circumstances must dictate what relief may be needed. Let’s take a look at several bankruptcy and debt management options in greater detail.
The first step is to classify an individual’s debts and assets. There is a means test for filing a Chapter 7, where debtors with a certain amount of disposable income and an income above their state’s median might not qualify. In addition, certain types of debt are not eligible for discharge in a Chapter 7, including tax debts, alimony or child support, and student loans. If an individual is struggling with those categories of non-dischargeable debt, other options may be a better fit.
In a Chapter 13 bankruptcy, a debtor agrees to repay creditors for three or five years. However, this option requires that a debtor have enough disposable income to pay off his or her priority and secured debt. Unsecured debt does not have to be paid in full, but payments to unsecured creditors must generally equal the value of the individual’s nonexempt property.
For example, an individual facing foreclosure might opt for Chapter 13, as the bankruptcy filing will create an automatic stay and the repayment plan might prove to be more manageable. The debtor in a Chapter 13 may pay back missed mortgage payments over the life of the plan and be able to keep the house. In our next post, we will explore some bankruptcy alternatives, like debt consolidation.
Source: FindLaw, “Chapter 7 Bankruptcy Checklist,” copyright 2016, Thomson Reuters