Eligibility for Consumer Bankruptcy
If you are struggling with debt, you may be thinking about filing for consumer bankruptcy. The two most common types of consumer bankruptcy are Chapter 7 bankruptcy and Chapter 13 bankruptcy. In some cases, however, individual debtors need to file for Chapter 11 bankruptcy if they are not eligible for Chapter 7 or Chapter 13. We want to provide you with more information about eligibility for different types of consumer bankruptcy available to Florida residents.
Passing the “Means Test” in Chapter 7 Bankruptcy
An individual can only file for Chapter 7 bankruptcy under the U.S. Bankruptcy Code if she or he is able to pass the “means test.” Since Chapter 7 bankruptcy is a type of liquidation bankruptcy, it results in all of the debtor’s non-exempt assets being liquidated to provide some money to creditors. Then, within a relatively short period of time, all eligible debts are discharged and the debtor gets a fresh start. Given the timetable for discharge in a Chapter 7 bankruptcy, the “means test” exists to ensure that the debtor really needs Chapter 7 bankruptcy and does not have enough regular income to file for Chapter 13 bankruptcy instead.
Typically, taking the “means test” requires filing one or two separate forms:
- Form 122A-1, which is the “statement of your current monthly income”; and
- Form 122A-2, which is the “means test calculation.”
The “means test calculation” requires a debtor to provide substantial details about his or her sources of income and any deductions in order to show what the debtor’s monthly disposable income. If your disposable income exceeds a certain amount, then the Bankruptcy Code presumes that Chapter 7 bankruptcy would be abusive, and you may need to file for Chapter 13 bankruptcy instead.
Chapter 13 Eligibility for Consumers
Some consumers elect to file for Chapter 13 bankruptcy because it has some benefits over Chapter 7 bankruptcy. For example, Chapter 13 bankruptcy can allow a debtor to stop a foreclosure and to get back on track with a mortgage. However, some people file for Chapter 13 bankruptcy simply because their disposable income is too high to qualify for Chapter 7.
At the same time, there are some eligibility requirements for Chapter 13 bankruptcy, too. The following are debt limits for Chapter 13 bankruptcy:
- $1,257,850 in secured debt; and
- $419,275 in unsecured debt.
If you have more debt than the above, you may be ineligible for Chapter 13 bankruptcy. In such a case, you may need to consider filing for Chapter 11 bankruptcy. Chapter 11 is very similar to Chapter 13 in that both are reorganization bankruptcies in which the debtor repays debt over a period of time according to the terms of a payment plan. However, the filing costs for Chapter 11 are significantly higher than for Chapter 13—$310 for Chapter 13 and $1,717 for Chapter 11.
Seek Advice from an Orlando Bankruptcy Lawyer
If you need assistance determining your eligibility for consumer bankruptcy, an Orlando bankruptcy attorney can help you. Contact Anderson & Ferrin to learn more about the services we provide to Floridians.