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For individual filers, there are basically two kinds of bankruptcy

Federal bankruptcy laws create protections for people who are struggling to keep up with their financial obligations in Florida. Individuals who are considering bankruptcy have two options, generally speaking: Chapter 7 and Chapter 13. It is important to understand the differences between these two types of bankruptcy as one or the other may be better depending on the specific facts of a person's situation.

Chapter 13 bankruptcy is sometimes referred to as wage-earner's bankruptcy or reorganization bankruptcy. In a Chapter 13 case, the petitioner is required to submit a plan to repay debts, to the extent possible, over a period of three or five years. Generally speaking, the person gets to keep his or her assets but must also stay current with monthly bills and the repayment plan for the duration of the process.

By contrast, a Chapter 7 bankruptcy might last only three to six months before discharge. This form of bankruptcy is sometimes called liquidation bankruptcy because the petitioner is required to liquidate all non-exempt assets in order to pay down debts. In order to file under Chapter 7, petitioners must pass the means test. The first step of the means test is a comparison of the person's income to the median income for the state. If the latter is less than the former, the person has passed and may file Chapter 7 bankruptcy. There are situations where people with higher incomes can file Chapter 7, but these situations are more complex.

An attorney who practices bankruptcy law may be able to help people who are struggling financially to reduce or eliminate debts. An attorney might examine the facts of the client's situation to determine which type of bankruptcy is likely to work best or draft the bankruptcy petition to begin proceedings. Filing for bankruptcy places an automatic stay on all collections actions, and the client may be able to retain ownership of important assets.

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