An overview of eligibility for personal bankruptcy

A person struggling financially in Florida might choose to file for bankruptcy. The Bankruptcy Protection Act of 2005 set up consistent standards for judging someone’s eligibility for protection under Chapter 7. The law imposes a means test to establish the apparent impossibility of fulfilling obligations to creditors.

The first step involves looking at the debtor’s income throughout the six months previous to the bankruptcy filing date. A cap is set by the state’s median family income. If the debtor’s income is equal to or less than the median level of income, a Chapter 7 filing may proceed. The calculation of income will include many sources of money, such as wages, salary, tips, pensions, business income, royalties and child support.

Special circumstances might allow a person who did not pass the means test to gain Chapter 7 protection by submitting documentation to the court about recent job loss or serious medical problems. Otherwise, a debtor earning above the median income might still qualify for Chapter 13 protection. Under this chapter of bankruptcy, the person must create a five-year plan to repay debts.

An lawyer familiar with bankruptcy law could advise a client who is looking for debt relief. Information about which income must be counted and which expenses are allowable deductions could be shared by a lawyer. If it looks like the person could qualify for Chapter 13, the lawyer could manage negotiations with the creditors to establish the priority order of debts for repayment. Problems like harassment by creditors might be curtailed by bankruptcy as a filing requires creditors to cease collection efforts temporarily. The lawyer could support the client by preparing all court paperwork and dealing with a mortgage lender if the threat of foreclosure exists.