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How a Chapter 13 bankruptcy works in Florida

Florida residents looking for solutions for dealing with mounting debt often consider filing for bankruptcy. A Chapter 7 or a Chapter 13 filing may each provide relief for those struggling to meet financial obligations.

One important step towards making an informed choice is understanding how each type of bankruptcy works. Beyond that, your attorney can work with you to figure out whether a Chapter 7 or a Chapter 13 filing, or a different solution entirely, would suit your needs better.

Overview

A Chapter 13 bankruptcy basically consists of a repayment plan that the court oversees. The trustee will set up a plan where you make monthly payments to your creditors for a period typically lasting between three and five years. Payment amounts generally depend on your disposable income, which consists of your income minus expenses for living necessities such as rent, food, transportation and insurance. The payments may take care of the full amount of your debt or part of it, with the remaining eligible debt to be discharged at the end of the payment period.

Income and debt amounts restrict eligibility

An income high enough to enable you to make reasonable monthly payments is key to determining your eligibility for a Chapter 13. Federal bankruptcy law also limits the amount of debt you may have to be eligible. Currently, this limit consists of unsecured debt of up to $394,725 and secured debt of up to $1,184,200.

Two types of debt

Secured debt means the type of debt where the creditor has a property right in whatever you borrowed the money for until you pay everything back. Common types of secured debts include mortgages and car loans. Unsecured debt is typically consumer debt, medical bills and similar items.

Chapter 13 can help with secured debt

One major advantage of Chapter 13 over Chapter 7 is that it can enable you to hold on to assets such as a house that exceeds Florida's exempted value. Chapter 13 allows you the option of including various types of secured debt in your bankruptcy plan or of giving the asset back to the creditor. Under some circumstances, you may also be able to continue making payments on a secured debt not included in your payment plan.

 

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Paul Urich
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Law Office of Paul L. Urich, P.A.
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