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When you must file Chapter 13 bankruptcy over Chapter 7

The economy has shown steady improvement since the last recession a few years ago, but that does not mean people in Broward County are not still struggling financially. An unexpected medical emergency, natural disaster or health issues can easily send someone into a financial whirlwind. In many cases, people try to stay afloat by using their credit cards but then the reality of their situation hits and they start looking for debt relief by filing for Chapter 7 or Chapter 13 bankruptcy.

Filing for Chapter 13 is often not the first choice for people, as this means that they will have to repay their debt. Many people would rather file Chapter 7 which erases the debt completely. However, under bankruptcy law, people are required to file Chapter 13 if their disposable income is over $166.66. This is generally determined by a trustee through an evaluation process. The process, referred to as a Means Test, looks at the person’s debt, mandatory obligations and income.

When people are required to file for Chapter 13, they should understand that they will need to go through a restructuring process for their debt which generally provides a way for them to pay the debt off over time. In addition, some assets can be sold by the trustee in an effort to pay down debt.

Bankruptcy filing offers people the chance to have a fresh financial start. In many cases, people want to repay their debt while still having the opportunity to rebuild their financial foundation and bankruptcy allows them to do that. It is also a good idea to meet with an experienced bankruptcy attorney who can answer questions and discuss available options.

Source: The Paramus Post, “Two Very Important Changes To Bankruptcy Law Everyone Should Understand,” Angela Sanders, March 21, 2014

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