Evaluating your bankruptcy options in Florida

Chapter 7 and Chapter 13 bankruptcy plans both offer help to Floridians struggling to keep up with their debts but in very different ways.

When bills keep piling up without any good way to pay them, Florida residents may feel a huge weight on their shoulders. This type of financial stress can be hard to live with. When in this type of situation, consumers should know that they have options and bankruptcy may well be one of those options worth considering. However, not all bankruptcy chapters are the same. How can people know if bankruptcy can help them and which chapter is right for their situation?

What consumer bankruptcy options do I have?

Chapter 7 and Chapter 13 bankruptcies are the most commonly used forms of bankruptcy by consumers. As credit.com explains, Chapter 7 bankruptcies tend to be the quicker and less expensive of the two. However, Chapter 13 bankruptcies may offer consumers the ability to retain assets that they may otherwise lose in Chapter 7 as well as the ability to strip second mortgages and the possibility of mortgage modification on homes.

Both Chapter 7 and Chapter 13 bankruptcies provide the same relief from stressful debt collection activities and offer a path to a better financial future.

How does a Chapter 7 bankruptcy work?

In a Chapter 7 bankruptcy, unsecured debts may be able to be completely eliminated. An unsecured debt is anything that is not tied to some form of collateral. A car loan, for example is a secured debt because the car itself acts as collateral. A credit card balance and medical expenses are forms of unsecured debts.

Secured debts such as mortgages or car loans are handled differently. The Debtor may surrender the collateral back to the lienholder in full satisfaction of the debt or agree to keep the collateral and keep making payments.

Please be aware that real or personal property may be kept or lost by filing a Chapter 7 case. The Debtor's protected property, also called "exempt property" may be retained by the Debtor and is not subject to liquidation. All other property is subject to liquidation by a chapter 7 Trustee for the benefit of your creditors. The property that a Debtor is allowed to keep depends upon the exemptions allowed under the law where the Debtor files or how long the Debtor has resided in that jurisdiction. Consultation with a bankruptcy attorney is critical to determine what property is protected.

How does a Chapter 13 bankruptcy work?

In a Chapter 13 bankruptcy, no assets are lost or sold for repayment purposes unless voluntarily surrendered by the Debtor. This is because the Chapter 13 plan is itself a form of restructured repayment. While a Chapter 7 case may be completed in a matter of a few months, a Chapter 13 plan can last up to three to five years.

Debtors agree to make monthly payments for anywhere between 36 and 60 months to a trustee. The trustee in turn makes payments to creditors. All assets such as cars, homes, jewelry and more are kept by the consumers. At the end of the repayment period, the bankruptcy is discharged.

Which chapter is right for me?

A Debtor's income, value of property and the types of debts will play a large role in identifying which bankruptcy chapter is best for them. There are other factors that may also contribute to this decision. For this reason, it is best to work with an experienced bankruptcy attorney to evaluate the situation and make the right choice.