Is it Time to File for Bankruptcy?
Sitting down with the checkbook and a stack of bills each month can be a daunting experience. When the money going out of the bank account is more than the money coming in – it’s time to look for a way out of debt.
What is Bankruptcy?
Federal laws have been established to help individuals and companies find relief from debts and to be able to make a fresh start. These laws were created to help honest but unfortunate debtors that have fallen into financial hardships with little to no reprieve.
There are 2 different types of bankruptcy that can be filed, Chapter 7 or Chapter 13. Chapter 7 bankruptcy liquidates all non-exempt assets to pay off the creditors. This is preferred if a debtor has little income and large unsecured debts such as medical bills and credit cards. Chapter 13 bankruptcy reorganizes debt and uses a payment plan to pay down the creditors. This is preferred if a debtor has income but wants to avoid foreclosure or needs time to catch up on all financial obligations.
You need to understand that bankruptcy may not clear you of all financial responsibilities. You may be required to pay secured loans such as the mortgage, student loans, alimony, and child support.
When to File
There are times we would all like to walk away and start new; it is time to seriously consider bankruptcy when:
- You have been out of work for an extended period of time with little to no unemployment or other income.
- You are very delinquent on taxes.
- You are near foreclosure.
- Your wages are being garnished to pay creditors.
- There are pending law suits to pay creditors.
Advantages and Disadvantages
As with any decision, it is best to weigh the pros and cons against each other with filing bankruptcy.
Some advantages to filing for bankruptcy are:
- Automatic Stay – creditors must stop calling and trying to collect on debts owed once an Automatic Stay is filed.
- Some properties may be exempt from being sold – depending on the properties owned and how the debt is laid out, you may be able to keep ownership of some properties.
- Begin to fix credit score – bankruptcy adversely affects your credit score, but it is probably already low due to being behind on payments. You will be able to move ahead and start rebuilding your credit again.
- Mental relief – The knowledge that you are able to stop the harassing calls and ready to move forward in life will allow you to sleep again at night.
Some disadvantages to filing bankruptcy are:
- Negatively affects your credit score – albeit your score may already be affected, but this will remain on record for a number of years. Chapter 7 remains on your credit history for 10 years and Chapter 13 for 7 years.
- Other affects of credit score – Many employers and housing agencies check your credit score, and bankruptcy may negatively affect your chance at housing or employment.
- Not all property is exempt and may need to be sold to fulfill some of the financial obligations.
- Mental impact – although you may relieved to be out from underneath the mountain of debt, some people have trouble accepting the fact that they had to file for bankruptcy, and don’t like knowing that this is now public record for anyone to see.
- Higher interest rates – if you are granted loans or lines of credit, your interest may be higher due to this past history.
The Next Step
Once you have checked all your options, understand the advantages and disadvantages, and have decided that filing for bankruptcy is in your best interest, the next step is to file. You can either file for bankruptcy yourself, or hire a skilled bankruptcy attorney to ensure all creditors are notified and handled properly.
The Law Offices of Travis Koon have handled many bankruptcy claims and does so with the knowledge and sensitivity that you deserve. When filing for bankruptcy in Florida, you deserve an attorney that understands bankruptcy and will help you through this difficult time. We represent individuals in Gainesville, Jacksonville, Miami, and Lake City; call us today to start down the road to recovery.
Travis Koon, Esquire
Eduardo Fons, Esquire
The Law Office of Travis Koon, PLLC
291 NW Main Blvd
Lake City, Florida 32055