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When bankruptcy makes sense

For some Florida consumers, bankruptcy is an effective method of debt relief. However, there are steps that need to be taken prior to filing. First, people may want to look at their budgets to get a better idea of their spending habits. If there is nowhere to cut spending to allocate more toward outstanding debt, bankruptcy may be the best option.

The two primary forms of consumer bankruptcy are Chapter 7 and Chapter 13. Under Chapter 7, the debtor’s non-exempt assets are liquidated with the proceeds used to pay off creditors. There is a means test that must be satisfied before an individual is allowed to file under this chapter. In addition, people who have filed for Chapter 7 bankruptcy in the past eight years are generally not eligible to receive a debt discharge.

Chapter 13 bankruptcy is designed for people who have a reliable source of income. Under this chapter, a person is allowed to reorganize debt under a court-approved repayment plan over a period of three to five years, Upon successful completion of the plan, most of the remaining unsecured indebtedness will be discharged. As is also the case with Chapter 7, debtors are required in most cases to take a credit counseling course prior to filing.

Those who are looking for debt relief may be interested in filing for either Chapter 7 or Chapter 13 bankruptcy, depending upon their financial status. An lawyer who has experience in bankruptcy law can review a client’s case to determine which chapter may be available. Once the determination has been made, an lawyer can assist with the preparation of the petition.

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