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Steps in filing for Chapter 13 bankruptcy

The two most common forms of bankruptcy for Florida consumers are Chapter 7 and Chapter 13. A person's eligibility for either of these depends in part upon income and amount of debt.

Chapter 7 involves liquidating assets so that debts can be paid off. It usually is over within three or four months. With a Chapter 13 bankruptcy, a person is allowed to reorganize debts into a payment plan that lasats three or five years. However, it is necessary to prove that it is possible to make these payments on the income the person has.

As a part of going through Chapter 13 bankruptcy, a person will be required to go through credit counseling. While there is a cost for the credit counseling, it may be provided at reduced rates or for free based on a person's income. Then the person has to create a payment plan. Certain debts must be paid first including some tax obligations, alimony and child support. The next priority is secured debts including mortgages and car loans. Unsecured debts, such as credit cards and medical bills, are the last priority, and it is possible that they may not be repaid although a person must appear willing to repay them.

Some types of debt cannot be discharged in bankruptcy. Among these are the above-mentioned alimony, tax and child support along with most student loan debt. However, restructuring as well as paying off or discharging other existing debt can help a person manage these debts more effectively. Both types of bankruptcy filings put at least a temporary stop to creditor harassment.

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