The Florida Bankruptcy Means Test

Yes, everyone has the right to file for bankruptcy protection, but that is not the whole story. Most people who have seriously considered filing for bankruptcy have heard the terms chapter 7 and chapter 13. If someone you know has filed for bankruptcy, you might even know how the chapter 7 or chapter 13 bankruptcy filing process works. The welcoming image you see when you look for information about bankruptcy online does not square with the grueling process your friends went through when they filed for bankruptcy. It is true that filing for bankruptcy leaves you in a better financial position than you would be in if creditors had sued you and won, but the process of filing for bankruptcy is only slightly less painful than going through the debtors’ exams that some Southern states put defendants through in business to consumer lawsuits. When you file for bankruptcy in Florida, you must undergo a means test to see which chapter is the appropriate one for your filing; whether you file for chapter 7 or chapter 13 is up to the bankruptcy court, not up to you. To find out more about chapter 13 means testing, contact a Miami chapter 13 bankruptcy lawyer.

What Determines Your Eligibility for Chapter 7 or Chapter 13 Bankruptcy?

In a chapter 13 bankruptcy case, the applicant pays a certain percentage of his or her disposable income to the bankruptcy court every month for three to five years, and the bankruptcy court pays it to the creditors. At the end of the three-year or five-year period, the bankruptcy court discharges the remaining balance of the applicant’s eligible debts. Meanwhile, in a chapter 7 filing, the court discharges your debts as soon as the filing process is finished, and sometimes it sells assets that belong to the applicant to do this. The process of determining which chapter you can file is called means testing.

The first step in Florida’s bankruptcy means test is to determine your household income. If it is less than the median income for your area, you are eligible for chapter 7, but if it is higher, you must answer additional questions. The next step is to determine your disposable income, which is your annual income minus medical and dental expenses, car payments, transportation expenses, work-related expenses, and court-ordered alimony or child support obligations. If your disposable income is low enough, you might still be eligible for a chapter 7 bankruptcy filing. If the court determines that your disposable income is high enough, it will require you to file under chapter 13. If you file under chapter 13, but you miss one or more payments on your payment plan, the court will change your case to chapter 7.

Work With a Debt Lawyer About Bankruptcy Eligibility

A South Florida debt lawyer can help you maximize your chances of being eligible to file for chapter 7 or chapter 13 bankruptcy, depending on which bankruptcy category you want.  Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.

Source:

flsb.uscourts.gov/faq/means-testing-what-it-where-can-i-find-information-it