If you are struggling with debt and feeling overwhelmed by collection efforts, you may be wondering if bankruptcy is the right option for you. Bankruptcy can provide you with a fresh start and help you regain control of your finances.
Not a one-size-fits-all solution
However, bankruptcy is not a one-size-fits-all solution. Bankruptcies come in various forms and each has its own drawbacks and benefits. Depending on your situation, you may qualify for one type of bankruptcy but not another.
You may also have to consider the impact of bankruptcy on your credit score, assets and your future financial goals.
Types of bankruptcy
There are three main types of bankruptcy that individuals can file in Florida: Chapter 7 and Chapter 13. Chapter 7 bankruptcy involves selling your non-exempt assets to pay off as much of your debt as possible. The remaining debt is then discharged, meaning you are no longer legally obligated to pay it.
Chapter 7 bankruptcy can wipe out most types of unsecured debt, such as credit cards, medical bills, personal loans and payday loans. However, some debts are not dischargeable, such as student loans, child support, alimony, taxes and fines.
To qualify for Chapter 7 bankruptcy, you must pass a means test that compares your income to the median income in Florida. Those with below that median income in St. Petersburg or anywhere else in Florida can file Chapter 7.
If your income is above the median, you may still qualify if you can show that you have little or no disposable income after paying your necessary expenses.
Chapter 13 bankruptcy
Chapter 13 bankruptcy involves creating a repayment plan that lasts 3-5 years. During this time, you make monthly payments to a trustee who distributes the money to your creditors. You get to keep your assets as long as you stick to the plan. Once your planned payments are completed, any unsecured debts that remain are discharged.
Chapter 13 bankruptcy can help you catch up on missed payments on secured debts, such as mortgages or car loans. It can also help you lower your interest rates or extend the terms of your loans.
However, you must have a regular income and enough disposable income to afford the planned payments. To qualify for Chapter 13, you must have less than $419,275 in unsecured debt and less than $1,257,850 in secured debt. These limits are adjusted periodically for inflation.