Why Bankruptcy Might Not Be Your Best Option Even if You Qualify

Debt is crushing Americans. In the second quarter of 2023, the Federal Reserve Bank reported over $17 trillion in debt for U.S. households including over $1 trillion in credit card debt. Families are often torn apart and forced to live well below their means just to manage incredibly high debt payments.

Many are forced to turn to bankruptcy. This legal avenue to debt relief appeals as a tool to get out from under some of the overwhelming burden people carry, but it comes with some significant negative consequences, as well.

The Negative Consequences of Bankruptcy

You are prohibited from getting certain types of loans including car loans and mortgages for a certain period of time depending on which chapter you file for. Your credit takes a major hit. When we work with bankruptcy clients, we focus on communicating the severity of these consequences before moving forward. It’s important to understand the other side of bankruptcy before moving forward.

And, ultimately, many people who qualify for Chapter 13 bankruptcy end up still paying the total value of their debt through a court-approved payment plan. Anyone deemed to have enough disposable income to pay off their debt will not see the debt relieved but will simply have payments stretched out.

For example, if you owed $200,000 in debt and the court decides you have the disposable income to take that on you are just given a payment time that stretches $200,000 over a defined period of time. This helps you alleviate the immediate burden of the debt, but you still end up paying the same amount.

Negotiating with Creditors May Be Your Best Option

Instead of relying on the bankruptcy court to dissolve your debt, you may be able to alleviate a large portion of your debt by dealing with the creditor directly. Our team often pushes clients that come in for bankruptcy to go this route instead.

Creditors still make a significant amount of money even if you don’t pay every penny owed. High-interest rates and fees drive their business, so even if you pay a lump sum far below your payoff amount you still receive relief.

At The Law Office of Ray Garcia, we help you make the right decisions with your debt so you aren’t left with the same amount of debt and significant negative consequences. We help clients move forward with bankruptcy and negotiate directly with creditors. Contact our office if you need help managing your overwhelming debt.

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Law Office of Ray Garcia, P.A.

Our mission is to provide our clients with legal services that not only meet their needs but exceed their expectations. We approach all practice areas with care, knowledge, experience, and determination. Trusted In South Florida For Decades.

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