The past year has been tough on Americans, and people from many stations in life have seen their financial futures threatened by crippling medical debt, business closures, reduced hours or layoffs. When earnings go down, debt usually piles on.
Florida residents who are feeling overwhelmed by debt may be considering some kind of debt relief, but aren’t sure if it’s better to seek debt management or a loan modification on the home mortgage, or to go into bankruptcy. It can help if you are living in Miami-Dade County to reach out to an experienced bankruptcy attorney for advice on the best plan moving forward.
What kinds of bankruptcy are there?
Most bankruptcy cases available to individuals are filed under one of two chapter of the Federal Bankruptcy Code. They are:
- Chapter 7, or “straight bankruptcy”, is a liquidation proceeding that takes place if the individual’s income is below the state’s minimum income threshold, as determined by a means test. People filing for Chapter 7 in general are looking for a discharge from debt so that they can get a new lease on life. Their debt may have grown because of medical expenses from illness, unemployment or overextended credit. There is some debt, such as child support, alimony, or tax debt that cannot be discharged. School loan debt can rarely be discharged.
- Chapter 13 reorganizes a debtor’s obligations, which may also involve discharging some debt. Under a Chapter 13 filing, a court-appointed trustee will oversee a debt management plan that will halt foreclosure proceedings and allow people to catch up on back payments over time with a structured repayment plan. The individual will retain property such as the family home or car, and under the plan they will repay all or part of certain debt over a period of three to five years.
What does bankruptcy look like in Florida?
In Florida, for a debtor to be eligible for a Chapter 7 bankruptcy, they must pass a minimum means test, which is a monthly household income of less than $7,454 over a period of 60 months, with adjusted minimums for the number of family members. If the individual’s debts are not primarily consumer debts, then they are exempt from the means test.
Florida has a generous homestead exemption for residents who have lived in the state for a minimum of 40 months. If they qualify, this exemption protects the household main residence of unlimited value from creditors. For those who do not meet this residency requirement, federal law offers a generous cap on the exemption at $160,375.