Florida Bankruptcy Overview
Chapter 13 bankruptcy is also known as “reorganization bankruptcy” or the “wage earner’s plan”. Under this bankruptcy plan, the debtor must pay off some of all of his or her debts, but does so under the guidance and protections of the Florida bankruptcy court. Modifications enacted under the Bankruptcy Abuse and Consumer Protection Act of 2005 make it more difficult to file Chapter 7, or absolute bankruptcy, and put more debtors into Chapter 13 plans. Debtors must nowadays pass a “means test” which calculates their income as compared to their state’s average mean income to determine their eligibility to file Chapter 7. Once a debtor has paid off all debts under a Chapter 13 plan as directed by the court, the rest of his or her debt is discharged.
Specific standards must now be met before filing for Chapter 13 bankruptcy:
• Income cannot exceed $922,975, and your unsecured debts can’t be more than $307,675. An unsecured debt is debt such as credit cards or consumer loans. Secured debt is your mortgage or automobile payment.
• Your income must be regular. You must have a full time job and be deemed able to repay debt.
• You must have no unpaid taxes.
• You must receive mandatory credit counseling from an approved agency before you can file for bankruptcy. Some of these agencies are permitted to charge you for this counseling, but they must also be willing to counsel you for free if you cannot pay. A listing of these agencies is available online. The certificate you receive from this counseling must be presented to the FL bankruptcy court along with your filing documents.
• The length of your plan will be driven by how much you owe. This test is a comparison of your monthly income, averaged over the last six months, with your average state median income. If your income is higher than the state median income, you will have to have a five-year plan for debt repayment. If your income is lower, then you’ll have a three-year plan.
• Your first payment will be due within 30 days of the date you file your request with the court. The amount of your payments will be established by the court. You may make these payments yourself to your assigned trustee or you may elect to have the amount taken out of your paycheck by payroll deduction.
• At the end of your plan, you will be expected to attend a budget counseling course with an agency approved by the United States Trustee’s Office and show evidence of successful completion. You must be up to date in all child support and alimony payments. Once all these criteria are met, any remaining debts that are eligible for discharge will be discharged.
