This article discusses what are advantages of filing bankruptcy as well as its disadvantages.
Most legal and collection efforts pause the moment you file for bankruptcy. Creditors who violate the automatic stay can be sanctioned by the bankruptcy court. See 11. U.S.C. section 362.
Most debts such as credit card debts, medical bills, personal loans, and civil judgments can be discharged in bankruptcy. Once you receive the Order of Discharge, your creditors can never attempt to collect from you in the future.
In most chapter 7 bankruptcy filings are determined no asset cases by the bankruptcy trustee where no assets are liquidated. For people who have assets, Florida has some of the strongest exemptions in the country, such as the Florida homestead exemption to protect your home.
You also get to apply a $1000 Motor vehicle exemption for 1 vehicle title in the debtor’s name. Some exemptions such as the $4,000 Florida wildcard can be applied in addition to the $1000 if the Debtor is not claiming a homestead exemption.
Filing for bankruptcy does not mean your credit score will be impacted forever. We have seen credit scores go up after filing for bankruptcy in many cases and have seen clients receive credit offers within months of completing the bankruptcy.
By filing for bankruptcy you get to eliminate most of your debts. You get to focus on rebuilding your financial future and not on paying high interest rates on credit cards or having to deal with collection agencies.
You will be able to answer your telephone calls confidently and allocate your money towards your future and not debt repayment.
Chapter 7 filings fees a re $338.00. Since there is no limit in the amount of debt you can eliminate, even you pay an average attorney’s fee of $1500, declaring bankruptcy can be much cheaper than repayment plans or debt consolidation programs.
We’ve discussed the benefits, now lets explore the cons of filing for bankruptcy.
You have to pass a means test to be eligible for chapter 7 bankruptcy. If your average six month income is above the median income for a family of your size in your state, you will have to take the second part of the test. If you do not pass, it means you may have disposable income to repay debts and not be eligible to file Chapter 7 bankruptcy.
Chapter 7 involves the liquidation of your nonexempt assets to repay your debts. If you are unable to exempt any asset, the Trustee can force you to turn it over and then sell it.
Debts such as child support, alimony, student loans, and most IRS obligations are not discharged in bankruptcy. Addtionaly, secured debts such as mortgages and car loans have to be paid if you want to keep your house or vehicle.
Filing for bankruptcy will affect your credit. A chapter 7 bankruptcy will remain in your credit for 10 years.
We’ve explored the advantages and disadvantages of bankruptcy (chapter 7), but what about chapter 13?
Below are some advantages of filing a chapter 13 bankruptcy.
Chapter 13 is a type of bankruptcy where you can catch up on missed mortgage payments, past due car payments, delinquent HOA dues and property taxes, and even delinquent IRS debts.
Different than chapter 7 bankruptcy, if you owe a lot of money on your mortgage and do not want to lose your house to foreclosure, you can present a chapter 13 plan to get current over a 3 or 5 year period.
If you’ve owned your car for more than 910 days prior to filing for bankruptcy, you can reduce your car loan amount down to the car’s market value at the time of filing.
Additionally, you can seek to reduce your car loan’s interest rate if it is too high to something more reasonable like 6.75 %.
You may be able to eliminate a second mortgage of your homestead if your first mortgage balance exceeds your property market value at the time of filing your case.
You are required to make monthly payments for a 3 to 5 year period which are applied to your creditors. The monthly payment amount is based on your disposable income.
A 2.7 million debt limit is not a problem for the majority of people who file for bankruptcy, but this limitation is not present in a chapter 7.
Different than chapter 7 which takes an average of 5 to 6 months to complete, in chapter 13 a debtor is required to present a 36 or 60 month plan of reorganization.
If you’re considering filing for bankruptcy, we can help. At Stiberman Law, we have the experience and knowledge to skillfully guide you through bankruptcy and come out with financial freedom and confidence in the future. To schedule a free consultation with a bankruptcy lawyer in Florida, reach out to us at (954) 314-4530 or fill out the form below to get started.
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