If you live in south Florida and have many unpaid debts, then bankruptcy can be an option for you. For an individual who has a higher level of income, the best approach may be Chapter 13 reorganization rather than Chapter 7 liquidation. The advantage of Chapter 13 is that it allows you to keep your property and assets as long as you can meet a payment plan of 3 to 5 years, in order to repay all or a portion of your debts.
What Are The Debt Limits For Chapter 13 Bankruptcy?
There are thresholds for the amount and type of debt that can be reorganized under Chapter 13, and this will be the first test to see if you qualify. Secured debts, such as a mortgage, can’t total more than $1,149,525. Unsecured debts must be less than $383,175. Unsecured debts include credit cards, medical bills and utility bills that are not attached to any piece of property or asset. Additionally, certain kinds of debt must be repaid in full, such as tax debts, owed employee wages, alimony and child support payments.
What Are The Income Limits For Chapter 13 Bankruptcy?
You must also pass the income test in order to qualify for a Chapter 13 bankruptcy to reorganize your debt. There are many sources you can include to compute your disposable income to meet this test, including regular wages, social security benefits, child support, royalties and welfare payments. There is a formula used to determine eligibility, and essentially, you must show that after meeting all of your monthly payments, you have excess disposable income to use in the Chapter 13 payment plan.
For example, a debtor in Miami would use the median income level for the same size household in all of Miami-Dade County. If the individual’s income is more than that, they may qualify for the 5-year repayment plan. If the household income is less than the median, then the court may grant a three year plan of repayment if the debtor can still show sufficient disposable income. The monthly median income in Miami-Dade County for a one person household is $3445, and for two people, it is $4320 per month.
How Is Eligibility Determined?
To determine eligibility, there are deductions from income that apply to south Florida residents that may differ from the rest of the state. For example, in Miami the amount allowed for rent or mortgage is $1566 for two people, and living expenses may be as high as $1053 for the household. The median income and expense ratio for a Miami debtor will affect the type of payment plan they can receive, and if their income is too low to make payments they may be forced to file Chapter 7.
Federal law provides for exemptions in bankruptcy for certain types of property, but in Florida those do not apply. An individual must use the state specific exemptions under Florida law for both types of bankruptcy. In a Chapter 13, this can affect how much the debtor will repay creditors. The computation of the specific Florida exemptions and application to the level of debt is complex, and should be handled by a competent bankruptcy attorney who knows the details of the state’s laws surrounding income, deductions and exemptions.
If you are struggling to repay your debt and are considering reorganizing them under Chapter 13, call Joel Aresty today at 1-855-DOC-LAWS (1-855-362-5297) to find out if you qualify.