Chapter 7 and Chapter 13 are both available to individuals and married couples.  Often married couples file jointly, although the law does not require both spouses to file, if only one spouse chooses to pursue bankruptcy relief.

Who May File Chapter 7?

There are no debt limits for Chapter 7 filers.  You could owe $10 million or $10,000.   Chapter 7 is also available to corporations as well as live human beings.   However, Chapter 7 filers who owe consumer debt must pass the Bankruptcy Code’s “means test.”   Congress added the means test to limit Chapter 7 relief to those who do not have the resources to pay back their debt in a Chapter 13.

The starting point for the means test is a “median income” evaluation.  This evaluation asks if your household income exceeds the median income for a similarly sized family in Florida.  Here are the current numbers as of March, 2010.  These numbers change every six months or so:

The median income is calculated by looking at your household income for the six months preceding the current month, then dividing by 6 to arrive at the average monthly income.   Multiply the average monthly income by 12 to get the annual gross household income.

If you annual income is below the median, you qualify for Chapter 7.  If it exceeds the median, something called a “presumption of abuse” arises and you must complete the means test to determine if you have enough money to pay back your bills.

Median income and means test calculations can get very complicated but the big picture to remember is that the Bankruptcy Code prefers Chapter 13 repayment plans to Chapter 7 liquidations and if you earn more than the median for your size family, we will have work to do.

Who May File Chapter 13?

Chapter 13 debt consolidation applies to filers who have liquidated unsecured debts less than $336,900 and liquidated secured debts less than $1,010,650.   If you owe more than these amounts your bankruptcy options may be limited, however you should call us to discuss how these debt restrictions apply.

The median income and means test calculations also apply in Chapter 13, and they help determine how much you will end up having to pay back your creditors.

Limitations on Repeat Bankruptcy Filers

The Bankruptcy Code also limits access to Chapter 7 and Chapter 13 for those who have filed before.  Here is a summary of the rules that apply for second, third and subsequent bankruptcy case filings.

If you have filed a bankruptcy in the past, whether here in Orlando or elsewhere in the country, please make that fact known to your Clark & Washington lawyer so we can offer you appropriate advice.