There’s a lot of misinformation regarding bankruptcy. It’s unfortunate because many people who are struggling financially could benefit from filing, but they allow myths and untruths to guide their decision.
If you’re faced with debts you are unable to afford and you aren’t sure what to do about the problem, declaring bankruptcy can help.
But what exactly does it mean to declare bankruptcy?
Bankruptcy is a legal process that allows a person who is unable to repay his or her debt to start over and have some or all of those debts forgiven through discharge. It’s a second chance in the world of consumer credit.
Bankruptcy Chapters, Chapters of Bankruptcy (Chapter 7, Chapter 13)
When you file, any assets you own might be liquidated and that money used to repay a portion of the debt you owe. It might also be possible to keep control of your assets and adhere to a repayment plan for several years that allows you to repay part of your debt. The specifics of how your bankruptcy is handled all depends on the chapter.
Chapter 7 is the best option for those who have little to no assets. When you file for Chapter 7, you determine which assets you’d like to exempt and which you’d like to liquidate. At the end of Chapter 7, any unsecured assets you had are discharged and you are no longer responsible for paying creditors. The entire process usually takes about three to six months.
In Chapter 13 bankruptcy, you can protect some or all of your assets. To file for Chapter 13, you need to agree to a repayment plan and have an income that allows you to make regular payments. Your specific plan is based on the amount of your debt and how much creditors would have received had you filed for Chapter 7. Chapter 13 provides a way to catch up on past due payments, such as your mortgage, and to deal with debts that would not have been discharged in a Chapter 7 filing. The entire Chapter 13 process takes about three to five years.
For more information about the differences between Chapter 7 and Chapter 13, check out this information from NOLO.com.
Consequences of Declaring Bankruptcy
There are advantages and disadvantages to declaring bankruptcy.
One of the primary advantages of filing is the automatic stay. This prevents creditors from pursuing debt collection actions against you the moment you begin the filing process. You’ll be relieved of calls, foreclosure or repossession efforts, and any other action on the part of creditors to collect a debt.
You’ll also enjoy the most important benefit of bankruptcy – discharge of your unsecured debts. This means you’ll be able to make a fresh start without debt hanging over you.
But despite these advantages, bankruptcy isn’t a magic pill. When you declare bankruptcy you’ll be faced with damage to your credit score, loss of privacy, and the inability to borrow money, at least for a period of time. You’ll also be giving up a great deal of control over your assets and your finances.
Whether or not the advantages outweigh the disadvantages varies from person to person. The important thing is to assess your situation and determine if bankruptcy is going to help you more than it hinders you.
For more information or discuss whether declaring bankruptcy in Florida is the right financial strategy for you, contact the Law Office of Robert M. Geller at (813)-254-5696 or schedule an appointment now.