Bankruptcy 101

Bankruptcy Overview

Filing a Fort Lauderdale bankruptcy is a difficult decision to make. Loss of employment, divorce, illness, medical bills, business failure, unexpected hikes in mortgage payments, and financial management issues are just a few reasons that cause good people to become overwhelmed by debt. People who fall behind in debt get trapped in an endless cycle of stress and pressure from debt collectors. You don’t have to stay there.

Bankruptcy laws were designed to give honest people a fresh start in life, free from burdensome debt and aggressive creditors. Bankruptcy filings in Florida are on the rise.

Companies and organizations offering credit counseling services are becoming more common, offering various methods for paying off your debt. Declaring Bankruptcy, on the other hand, allows you, in most cases, to erase your debt in just a few months.

Bankruptcy is an option available under Federal law to eliminate your debts. There are two main chapters of the U.S. Code that consumers file bankruptcy under: Chapter 7 and Chapter 13. Both chapters are named after the sections of the U.S. Code that contains the details of the law. Bankruptcy laws are in place for the purpose of helping people like you get the relief they need.

Credit Score Impact of Bankruptcy

Filing bankruptcy will not permanently damage your credit rating. The bankruptcy will appear on your credit report for 10 years. Most other credit information can also be included in a consumer credit report for 7 years. Civil suits, civil judgments, and arrest records, however, can be reported for at least 7 years, and longer if the information is relevant for a longer time period. For example, if the civil judgment against the debtor is valid for 10 years, it can be reported for credit-rating purposes for the same time period.

Bankruptcy candidates’ credit scores are often already damaged. A Fort Lauderdale Chapter 7 Bankruptcy allows for a clean slate and an opportunity to prove your creditworthiness. Usually the cost of obtaining credit with less than a squeaky clean credit profile results in the payment of higher interest rates on your borrowing. But you must ask yourself- what is the cost of not declaring bankruptcy, both economically and emotionally?

There are steps that you can take after filing a bankruptcy that will make it possible to re-establish good credit. These steps can be discussed at the initial consultation. It is possible to get credit cards and buy a house or car after filing bankruptcy.

Stop Creditors

When your bankruptcy petition is filed with the court by a Fort Lauderdale bankruptcy attorney, your creditors are immediately stopped from contacting you by federal law. An “automatic stay” is created that stops all pending and future collection actions against you until the bankruptcy case is resolved. Although a creditor can get relief from the automatic stay, they must petition the court to do so. This protection under the bankruptcy law means that once you file, all creditors must stop dead in their tracks. If you are in foreclosure, the mortgage company cannot continue, your car cannot be repossessed, garnishments must end and creditors can no longer contact you.

Types of Bankruptcy Relief Available

For consumer debtors, there are two primary chapters that offer bankruptcy relief – Chapter 7 and Chapter 13. The most common type of bankruptcy proceeding is a Chapter 7 liquidation bankruptcy. It is called a “liquidation” bankruptcy because the trustee will sell (or liquidate) non-exempt property of the debtor and the proceeds of the sale will be equally distributed between the creditors. Under a Fort Lauderdale Chapter 7 bankruptcy, your debts can be discharged ( wiped out ) by the court within 3 to 4 months if there are no objections by creditors or by the trustee. No payments have to be made to creditors once the matter is discharged.

Bankruptcy proceedings under Chapter 13 bankruptcy are a little different than Chapter 7. In a Chapter 13 bankruptcy, your disposable income is paid out to creditors over three to five years. Once you are done with your payment plan, the remainder of your debts are discharged. Disposable income means whatever money is left over to pay creditors after your everyday living expenses are deducted from your income. Although you have to pay a portion of your debt, there are benefits to a Fort Lauderdale Chapter 13. Under Chapter 13, you can keep your non-exempt property. You can also force your mortgage company or car loan company to allow you to catch up on any missed payments under the plan. The payment plan has to be approved by the courts and it is only available to debtors that have regular wages or a steady source of income.

In the majority of cases, debtors do not lose property in a bankruptcy. Under current Florida bankruptcy law, you are allowed to keep property up to the statutory and constitutional limits. It is important to know that although a bankruptcy will stop foreclosure and repossession actions upon filing, if you want to keep your house and your car, you will have to continue making those payments. Loans for homes and cars are secured by the property you bought and if you don’t make the payments the creditors will eventually be able to take the property.

Is bankruptcy right for you?

Bankruptcy cannot cure every financial problem and it is not the right step for every individual. At your initial consultation, we will assess your unique financial circumstances and explore alternatives to bankruptcy if there are any.

Contact us for a free consultation

Getting rid of that debt is easier than you think. The Bankruptcy Law Firm of Clare Casas can help you and make it easy to start fresh and enjoy life again. Contact us to schedule a free consultation with a Fort Lauderdale bankruptcy attorney.