Types of Bankruptcy in Florida
- Florida residents can choose among several types of personal bankruptcy, though most debtors opt to file Chapter 7 or 13, according to the United States Bankruptcy Court Middle District of Florida. No matter what type of bankruptcy you file in Florida, you must complete a number of requirements mandated by the federal bankruptcy codes, including pre-bankruptcy credit counseling.
- Chapter 7 allows financially struggling Floridians to receive permanent forgiveness of many of their already-existing debts. Before filing Chapter 7, a debtor must economically qualify by either earning less than the state annual median income figure or passing a federal means testing formula. The federal means testing formula calculates income, reasonable household expenses and amounts owed on existing debts; in some cases the formula proves that people who earn more than their state's annual median income level really can't pay their debts and take care of their families. As of 2010, the annual median income for a single Florida resident was $41,226, according to the U.S. Trustee Program. On the other hand, a family of four qualifies under a different median and could earn up to $69,009 a year if the head of household wanted to automatically qualify for Chapter 7 under the Florida annual median income tables.
- Chapter 13 bankruptcy enables Florida residents to receive debt restructuring even if they earn more money than is permissible for Chapter 7 or want to preserve assets. Also, the negative credit reporting time frame always associated with filing bankruptcy is reduced to seven years from the date of filing instead of 10 years as is the case with Chapter 7. Under a Chapter 13 plan, a Florida resident repays part of his debts under court supervision during a three to five year time frame. As a result, creditors may not take actions such as filing lawsuits, garnishing wages or foreclosing upon homes.
- Self-employed debtors and business owners are usually the only individuals who pursue Chapter 11 bankruptcy, according to the United States Bankruptcy Court Middle District of Florida. Chapter 11 allows debt reorganization that is similar to Chapter 13, but also covers any business debts and protects any business assets. Chapter 11 usually allows a corporate owner or an independent entrepreneur to keep all personal and business assets while partially repaying business and personal creditors.
