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Chapter 13 Bankruptcy Florida
Chapter 7 vs. 13: A Comparison Generally, with a Chapter 7, the debtor gives up his assets in exchange for the elimination of debts (there are exceptions, of course, in that the debtor can keep some assets and some debts are not discharged).

With Chapter 13, the debtor generally keeps his or her assets and adopts a plan whereby the debtor makes monthly payments to a trustee (who distributes the money amongst the various creditors according to the “priority” of those debts) for (usually) 5 years. At the conclusion of the plan, those “priority” debts that were required to have been paid in full will have been paid in full, and the balance owed on those debts that did not have to be repaid in full are discharged.

Chapter 7 vs. 13: Do I Have a Choice?
Although Chapter 13 may be “right” for some people (for example, those who want to reinstate their mortgages, or eliminate their second mortgage), other people may prefer to file Chapter 7 to get it over with and get their “fresh start.”

So, do you have a choice between filing Chapter 13 or Chapter 7? Usually no. Under the new bankruptcy law (called the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005”), there is something called a “means test” - a test to determine if the debtor has the “means” to repay a certain amount of his debts and, if so, must do so.

It’s complicated, but generally here’s how it works:
First, if the debtor makes less than a certain amount of money, the debtor can definitely file Chapter 7 (the target amount is the state’s median income for the debtor’s family size which is about $49,000 for a family of two and $64,000 for a family of four).

Second, if the debtor makes more than the prescribed amount, then the debtor can usually file Chapter 7 if the debtor’s debts are “primarily” (i.e. more than 50%) not consumer in nature. Conversely, the debtor cannot file Chapter 7 if the debtor’s debts are “primarily” consumer in nature. Consumer debts include: your home mortgages, car notes, credit cards, medical bills and student loans. Debts that are not consumer in nature include: IRS debts, business debts, and loans on rental properties.

Third, if the second paragraph dictates that the debtor cannot file Chapter 7 (referred to as “failing the means test”), then the debtor would have to file Chapter 13 unless his debts exceed the debt limits (to file Chapter 13, the debtor cannot have more than $1,081,000 in secured debt or more than $360,000 in unsecured debt).

How soon can I get a mortgage after filing for Bankruptcy?
Five years after Discharge for a conventional mortgage at conventional rates; three years after Discharge for an FHA mortgage at decent rates; and one year after Chapter 13 Plan payments begin (subject to certain conditions).

What if you have large tax debts?
If you owe the IRS large income tax debts, you will need a separate and very important analysis to determine whether your tax debts would be dischargeable at this point, or if you need to wait some period of time before filing your bankruptcy to maximize the amount of taxes that can be discharged. There is a separate fee for this (usually about 1% of the amount owed to the IRS), but is very important. Why would you want to file bankruptcy to discharge all your other debt if you would still owe IRS? Wouldn’t it be better to wait to file bankruptcy until ALL your debts (IRS and otherwise) are dischargeable? Ask us about this “tax analysis” service.

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Disclaimer: The purpose of this site is to present options available for resolving outstanding debt issues, not to provide legal or professional advice. Each person's case is fact dependent. You should not assume that any particular option discussed herein would apply in your case or be beneficial to you. You should consult with an experienced and licensed attorney to review the options that may be applicable to your fact pattern. Sending us an email or requesting information does not create an attorney-client relationship.

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