Most Florida residents who wish to file a Chapter 7 bankruptcy must meet requirements laid down by the Bankruptcy Abuse Prevention and Consumer Protection Act. Veterans who wish to eliminate debt they took on while on active duty and borrowers who incurred most of their debt while running a business do not fall under the provisions of the 2005 law.
The biggest hurdle potential Chapter 7 bankruptcy filers face is a two-part income means test. The first part of the test compares the borrower’s earnings with the state’s median income for a similar-sized family. Wages, business income, rents and unemployment benefits are counted when a borrower’s income is calculated, but Social Security benefits and income tax refunds are not. If the borrower does not earn more than the state median income, they will pass the means test and be approved to file a Chapter 7 bankruptcy. If they earn more, they move on to the second part of the test.
The second part of the bankruptcy means test involves assessing the borrower’s income and allowable expenses such as food bills, rent and health care costs. The goal is to determine whether or not the borrower earns enough money to repay at least some of their debts. Those who fail the Chapter 7 means test can still pursue debt relief by filing a Chapter 13 bankruptcy.
Individuals who are able to pass the means test are sometimes reluctant to file a Chapter 7 bankruptcy because they believe that they will lose their homes or their possessions will be sold off. Attorneys with experience in this area might be able to address confusion over this point, as well as other misunderstandings about bankruptcy. Florida has some of the nation’s most generous bankruptcy exemptions. Most Florida residents filing a Chapter 7 or Chapter 13 bankruptcy can exempt all of their home equity, up to $1,000 in motor vehicle equity and up to $4,000 in personal property.