You’re in financial hot water and the debt collectors keep calling. With your income already stretched too thin to meet all your basic expenses, there’s no way you can make all those payments on time. How do you say afloat? Maybe you’ve heard of bankruptcy as an option, but you’re not sure what it entails. Thankfully, an experienced Tampa, Florida debt protection lawyer from Ziegler Diamond Law: Debt Fighters can help you explore your options. Even if you ultimately decide to navigate a debt relief alternative to bankruptcy, it’s likely an option strongly worth your consideration. 

What is bankruptcy?

Bankruptcy is a legal process that allows an individual to eliminate or catch up on debts without the risk of facing lawsuits or other penalties for late payments. After filing for bankruptcy, and upon approval, the court issues a protective order — an “automatic stay” — which bars the majority of creditors from contacting you while your case is being decided. 

What is the difference between Chapter 7 and Chapter 13?

There are two types of bankruptcy procedures available to individuals in financial trouble: Chapter 7 and Chapter 13. Chapter 7 is the most common type of bankruptcy procedure, accounting for 63% of non-business bankruptcy cases in 2015.

Chapter 7 

Also known as “fresh start” or “liquidation” bankruptcy, Chapter 7 is reserved for low-income individuals who are unlikely to have the means to pay their debts in the foreseeable future. “Exempt” property — property that the filer can keep — includes vehicles (up to a certain value); reasonably necessary clothing, furnishings, and household goods; jewelry (up to a certain value); a portion of the filer’s home equity; pensions; and public benefits like welfare and social security. It is possible that some particularly valuable property won’t be treated as exempt during bankruptcy and may be sold to pay back a debtor’s creditors. However, most low-income Chapter 7 bankruptcy filers are able to keep the majority (if not the total sum) of their property safe with the assistance of an experienced Tampa, FL debt protection lawyer. When an individual files under Chapter 7, their debt (with the exception of certain kinds of ineligible debt) is erased. 

Chapter 13

Sometimes considered a “wage earner plan,” Chapter 13 bankruptcy does not eliminate debt altogether for several years. Instead, debt is reorganized so payment amounts become more manageable for the duration of a 3-5 year repayment plan. Under Chapter 13, debtors are able to help design their payment plan, which is then court-approved, supervised, and enforced. Chapter 13 typically allows filers to keep their property. 

Who is eligible to file for bankruptcy?

The Bankruptcy Abuse and Consumer Protection Act of 2005 requires debtors to pass a “means test” in order to qualify for Chapter 7. Ultimately, the bankruptcy “means test” determines whether the individual’s income is low enough to file. The test deducts specific monthly expenses from the filer’s current monthly income in order to determine their monthly disposable income. If the disposable income is not enough to cover a relatively significant portion of the filer’s debt, the filer is generally considered eligible for Chapter 7 bankruptcy. However, the court will reject the filer’s case if they filed a previous bankruptcy case within a specific period of time. The case may also be dismissed if the court believes the filer is defrauding creditors. Individuals whose income is too high to qualify for Chapter 7 may be eligible for Chapter 13 since their disposable income would allow them to pay back creditors over time. An experienced Tampa, FL debt protection lawyer can help you explore which Chapter of bankruptcy may be best in your situation. 

Filing for bankruptcy can be a complicated and stressful process, but you don’t have to go it alone. For help and support along the way, work with an experienced Tampa, FL bankruptcy lawyer. Call us today to schedule a risk-free, no-obligation consultation to explore your bet relief options.