If your debt levels have become overwhelming, our legal system offers a solution: bankruptcy. In this blog entry, we’re going to examine some of the basics of bankruptcy law here in Florida.
In bankruptcy, the debtor (the individual or couple in financial distress) seeks to obtain a discharge, which means that outstanding debts don’t have to be paid. One benefit of beginning this process is that once the bankruptcy is filed, creditors can no longer try to collect a debt without going through bankruptcy court to get permission. Which means those harassing phone calls should stop!
There are two primary types of bankruptcy: Chapter 7 and Chapter 13. In Chapter 7, the debtor must surrender most assets in return for having the debt discharged. In Chapter 13, the debtor is able to keep property by pledging to pay back the debt within a certain timeframe. If the court approves the debt repayment plan, the debt can be repaid according to the agreed-upon schedule, even if the creditors aren’t happy about it.
Some assets are protected in a bankruptcy. These often include the debtor’s car and home, but in most cases the debtor must continue to make payments on the home or car.
Bankruptcy may be denied for a variety of reasons, which include transferring an asset to hide it from the bankruptcy trustee, hiding assets, or making false statements. Some debts, often including student loans, certain taxes, and child support cannot be discharged in a bankruptcy.
Bankruptcy has a number of negative repercussions, as well, most notably a significant negative impact on the individual’s credit score. However, people can often begin to rebuild credit by making timely payments on remaining debts.
Bankruptcy may not always be the best solution to overwhelming debt. Alternatives include a negotiated reduction of payment to creditors, obtaining the assistance of a credit counseling service, reaching an out-of-court settlement, and consolidating debts. However, most other alternatives require the cooperation of creditors. If your creditor is not willing to cooperate, then bankruptcy may be the answer.
It’s wise to hire a lawyer if you are considering bankruptcy. Bankruptcy law is complicated and there are many important decisions to be made. A lawyer can best evaluate your particular circumstances and advise you on the best way to minimize the impact on your future credit.
If you have any questions about bankruptcy in general or about your particular circumstances, please give us a call! We look forward to helping you through this difficult process.
Law Office of Ray Garcia, P.A.
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