The Bankruptcy Code Explained
Face it, bad times do happen to good people. And very often, these bad times bring with them financial problems that sometimes can escalate quite rapidly. Is there a way out? Yes, there is. It’s called bankruptcy.
No matter what your connotation of bankruptcy is, let me inform you that bankruptcy is a completely viable and legal channel through which you can overcome your debt problems.
The major legislation that governs bankruptcy applications is the Bankruptcy Code.
There are 2 chapters in the Bankruptcy Code that apply to a bankruptcy case, namely Chapter 7 and Chapter 13. Chapter 7 is also known as straight bankruptcy or liquidation. When you file under Chapter 7, the court will review your income and compare it with a set average income for a family of your size in your state. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) requires you to be earning below this median income to be qualified for approval under Chapter 7. This is known as the means test. Every state maintains a list of median incomes derived through the US Census Bureau. If your annual income is below the threshold according to the size of your family, then you qualify to file for bankruptcy under Chapter 7 which will allow you to discharge most of your unsecured debt.
But if you earn more than the median income of a family of your size, then it is assumed that you can pay at least a small amount towards your unsecured debts. Therefore, you have to file under Chapter 13. Unlike Chapter 7, Chapter 13 requires you to repay a minimum amount of $100 per month for 6 years towards your unsecured debts.
Therefore, Chapter 13 allows you to restructure a debt to be paid off between 3 to 5 years. After paying all your monthly bills, your money is used to pay priority claims such as child support and taxes, secured loans like mortgages and vehicle loans, lawyer’s fees, administrative costs of the case and unsecured claims like credit card bills. The bankruptcy attorney will determine how much you should pay into the Chapter 13 plan, after calculating your net monthly disposable income. You cannot exclude any portion of income from the calculation. Your entire net disposable income must go towards your Chapter 13 plan. If you are married to a working spouse, his or her income will also be taken into consideration in the calculation.
In all these matters, you need an attorney you can trust and who will look into your interests. That’s where I and my office come in. We have extensive experiences in advocating for clients in hundreds of bankruptcy cases. Please call us at (813) 200 4133 today for a free, non-obligatory consultation.