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Miami Bankruptcy Attorney Explains the Difference Between Bankruptcy and Offers Advice for Consumers

Many consumers considering bankruptcy don't realize they have two primary options, according to one Miami bankruptcy attorney with bankruptcy attorney Miami fl. Individuals may file for Chapter 7 or Chapter 13 bankruptcy and, while both options may provide relief, each has advantages and disadvantages and not everyone who qualifies for one will qualify for the other.

According to the bankruptcy lawyer, Chapter 7 is referred to as straight bankruptcy liquidation, while Chapter 13 is a payment plan for individuals with regular income. With straight liquidation, bankruptcy filers are required to attend credit counseling with 180 days of filing, as well as pass a "means test" to determine eligibility. People with income higher than their state median will have trouble qualifying for Chapter 7, and may be forced to turn to a payment plan through Chapter 13 bankruptcy.

For cases filed in Miami, Florida after May 1, 2013, household income will be compared to the Florida median income of $3,493 per month average for a one-person family. If the family household income averaged over six months is over the state median, it is still possible to qualify for Chapter 7, although it is harder.

Chapter 7 bankruptcy is the most commonly used consumer filing, and it discharges, or eliminates, most pre-petition debts except for support obligations, student loans and taxes. Filers may use the homestead exemption and continue making mortgage payments to keep a home, as well as certain personal property and a vehicle.

Chapter 13 bankruptcy, on the other hand, does not wipe out debt. Instead, it creates a payment plan for individuals who do not qualify for Chapter 7. Under this plan, all or some debts will be paid off over up to 5 years and debts are discharged, except for those exceptions noted above. The majority of people who file for Chapter 13 bankruptcy don't complete their mandatory 3-5 year repayment plan, sometimes because they lapse behind or the court lets them off early for hardship reasons. Filers who fail to hold up their end of this repayment plan run the risk that the debts won't be discharged at all.

As the bankruptcy lawyer explains, Chapter 7 is mostly used by individuals with very little money, assets and property, whereas Chapter 13 is more often used by those with significant equity in a home or property or regular income that more than pays living expenses.

There is no right answer for everyone, and it's best to at least consult with an attorney prior to filing to discuss the real advantages and drawbacks to each option that are unique to the filer's position. For example, a homeowner who is behind on a mortgage but wants to make up the payments over time and reinstate the original agreement and keep the home may do so through Chapter 13 bankruptcy only.

Miami Bankruptcy Attorneys offers licensed attorneys to help individuals file for bankruptcy in Florida with minimal effort and hassle, and take advantage of legal advice to nagivate the court system and earn a clean slate.
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