When people think about individual bankruptcy, they often think it is the last option to deal with unmanageable debt. Often this debt comes from medical bills, credit card bills, personal loans, loss of employment and other factors. Regardless of the causes of debt, people worry about caring for their families. For the novice, the term bankruptcy is used interchangeably with Chapter 7 Bankruptcy. Chapter 7 may be an option for Floridians in this situation. The other common bankruptcy option for individuals in a Chapter 13 Bankruptcy. We will discuss that option in other blogs.
The following is meant to provide some basic information about Chapter 7 Bankruptcy. It is my hope to show how Chapter 7 may be an option for Floridians with unmanageable debt.
You Must Qualify for a Chapter 7
Another important thing to note is that not all Floridians qualify for a Chapter 7 bankruptcy. To qualify, you must verify your financial situation. Generally, if your income is below the Florida state median income level, you will qualify for Chapter 7 bankruptcy. For those above the median income line, you have to take the means test. The test looks at your debts and monthly payments in comparison to your income to figure out if can afford partial payments. If the means test finds that you cannot afford partial payments, you may be permitted to file a Chapter 7 bankruptcy. Otherwise, Chapter 13 might be a choice for you.
Get Rid of Most Debts
In Chapter 7 bankruptcy, you can discharge (or eliminate) all qualifying debts. Debts that qualify for bankruptcy include credit cards, personal loans, vehicle loans, mortgages, and medical debt. However, it is important to also understand which debts do not meet the qualifications. For example, Chapter 7 most likely will not eliminate student loans, tax debt, and child support. That said, at the end of your Chapter 7 case, all qualifying debt goes away once and for all.
Raise That Credit Score
I probably do not have to tell people this but if you have massive debt, your credit score is probably already bad. There is a myth out there that filing for bankruptcy will destroy your credit forever. That is simply not true. In fact, your credit score should improve shortly after filing your case. How is that possible? Because your income to debt ratio will be substantially improved when your unsecured debt has been wiped clean. For Floridians who use the Chapter 7 bankruptcy option, I can help with other strategies to improve your credit score.
Property Exemptions
Another myth about bankruptcy is that you will lose certain things like your house and car. However, Florida bankruptcy law does allow for some exemptions which means that you can keep some personal assets. For example, you may choose to reaffirm certain debts. This means that you agree to continue making payments in exchange for keeping the assets. In this situation, all payments must be current. Certain government pensions and other retirement funds are also exempt from bankruptcy proceedings.
Hopefully, this blog provides helpful information to show how Chapter 7 may be a viable option for you. Please call me if you have any questions. I would be happy to answer them and discuss your specific situation. You can also text AskRon to 21000 to get in touch with me.
