Murphy’s Law, which states that whatever can go wrong will go wrong, is especially relevant for personal finances. Unexpectedly losing a job combined with emergency health care expenses send the family budget into a rapid downward spiral. Now, we are experiencing a once in a lifetime medical crisis caused by the COVID-19 pandemic. More than 23 million Americans have lost their jobs, and the stimulus checks sent out to every American are just a small bandage trying to cover an incredibly large financial wound.

If you are dealing with an overwhelming amount of personal debt, as well as a dramatic decline in income, you probably have reached the stage of panic. The highly-rated legal team at the Marlene Markowitz Law Office wants you to know that filing for bankruptcy can be the ideal solution for you to address the financial burden ushered in by a major life crisis. We have helped clients living in South Florida understand the differences in the two most important bankruptcy laws: Filing for Chapter 7 or Chapter 13.

Chapter 7: When You Need to Start Over

Often referred to as “liquidation bankruptcy” or “straight bankruptcy,” Chapter 7 represents the most common form of bankruptcy law. Created to give Americans that have a high amount of debt and little income to pay for expenses, Chapter 7 eliminates most types of personal debt, including credit card balances and health care bills, as well as payday and personal loans. Starting with a clean financial slate is the primary legal intent of Chapter 7 bankruptcy law.

Qualifications Require for a Chapter 7 Filing

Because Chapter 7 absolves filers of most types of debts, bankruptcy law requires anyone seeking financial relief from a Chapter 7 filing to pass a means test. The means test represents a calculation that determines whether you are financially capable of paying off your personal debts. In 2020, the federal government established the following minimum income requirements for filing a Chapter 7 petition. The minimum income requirements factor in the number of household members and the income generated by the entire household over the course of one year.

  • 1-Member Household-$50,641.00
  • 2-Member Household-$61,619.00
  • 3-Member Household -$67,717.00
  • 4-Member Household-$81,091.00
  • 5-Member Household-$90,091.00
  • 6-Member Household-$99,091.00

Because of inflation and other factors such as the state of the American economy, the minimum income threshold for getting a Chapter 7 filing approved typically changes from year to year.

The Importance of an Automatic Stay

Federal lawmakers operated on the principle that “Desperate times require desperate measures” when it comes to helping Americans climb out of deep financial holes. This principle is apparent in a feature of Chapter 7 bankruptcy called an automatic stay. With creditors breathing down your back, not only do you need financial relief, you need it right now. An automatic stay granted for Chapter 7 filers prevents the continued pursuit of debt collection efforts. By simply filing the paperwork required for Chapter 7 bankruptcy, you can stop an eviction, wage garnishment orders, and disconnections by all utility companies. Homeowners also can prevent foreclosure proceedings from moving forward.

Meeting of Creditors

Around six weeks after you file for Chapter 7 bankruptcy, you have to participate in a 341 creditors meeting. The meeting gives every one of your creditors the opportunity to ask questions that concern your financial status. Your assigned bankruptcy trustee looks over your Chapter 7 petition to ensure it is accurate. Most 341 creditor meetings are mere formalities that begin the debt discharge process. Because 341 creditor meetings typically result in the discharge of debts, most creditors choose not to attend the meetings.

The Aftermath of Chapter 7

Filing a petition for chapter 7 bankruptcy should never be taken lightly. Approved Chapter 7 bankruptcy petitions stay on consumer credit reports for 10 years. Despite the damage done to your credit score, 10 years gives Chapter 7 petitioners plenty of time to raise a low credit score into a score that expands credit opportunities. After a few years, you should be able to receive auto financing, as well as get approved for most types of unsecured credit cards.

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Chapter 13 Bankruptcy: All about Reorganizing Personal Debt

Struggling to pay off debt is much different than being unable to pay off personal debt. If you are struggling to pay off personal debt, yet you believe you can get the job done with a little help, then you might be eligible to receive Chapter 13 bankruptcy relief. Chapter 13 represents a strategy to help petitioners catch up on debts that have started to snowball out of control. Since virtually every creditor prefers to get paid eventually, Chapter 13 is a popular form of bankruptcy for both consumers and creditors alike.

Chapter 13 is a good fit for consumers that face one or more of the following factors:

  • You want to eliminate an additional mortgage
  • You are confronted with a home foreclosure proceeding
  • You have fallen behind on most, if not all debt payments
  • You do not meet the income eligibility requirements established for Chapter 7 bankruptcy
  • Unemployment and/or a major medical expense has set you back financially

Federal law for both Chapter 7 and Chapter 13 bankruptcies require consumers to attend mandatory debt education and credit counseling classes. You have to present proof that you completed both courses to a bankruptcy judge before the judge issues a decision for your petition.

Contact Bankruptcy Lawyer Marlene Markowitz

Miami attorney Marlene Markowitz understands the heartache that develops for people that face seemingly impossible to overcome personal financial issues. By providing helpful advice and ensuring every bankruptcy petition exceeds the legal expectations of a bankruptcy court, we provide our clients with a way out of a deep financial hole.

Do not allow financial problems to prevent you from moving on with your life. Schedule a free initial consultation today with our firm today.

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