The Advantages of Bankruptcy

By Attorney Caroly Pedersen

For families struggling with the overwhelming burden of debt, caught in an exhausting cycle of juggling bills, debts and mortgage payments, the financial pressures can be devastating. And to make matters worse, many older Floridians, ages 55 and older, who have worked hard all their lives, lose their jobs, only to discover that their age makes it difficult to find a new one But, just when all hope seems lost, bankruptcy may offer a positive solution!

In addition to providing individuals with financial freedom and the opportunity to begin their financial lives again with a clean slate, Chapter 7 Bankruptcy can also put families back on the path to building a solid financial future Finances that were once gobbled up by credit cards and other consumer debts, can be used to pay household and living expenses without stress, and as circumstances improve, money can be set aside as saving for educational expenses, emergencies, retirement and other necessities of life

Chapter 7 Bankruptcy has many advantages, but there are also many commonly held misconceptions as well The most common is that it is impossible to get credit or to buy a car or house for 7-10 years after filing for bankruptcy Nothing could be further from the truth Normal credit can be easily re-established within several years, including automobile and home mortgage loans, since a person is virtually debt-free Once the bankruptcy process is complete, many consumers find that credit scores have improved, since late payments, write-offs and delinquencies on the credit

Alternatives to Chapter 7

Debtors should be aware there are several alternatives to filing Chapter 7 bankruptcy For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation Such debtors should consider filing Chapter 11 of the Bankruptcy Code Under Chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment

Sole proprietorships may also be eligible for relief under Chapter 13 of the Bankruptcy Code report have all been discharged through the bankruptcy. Bad credit stays on an individual's credit report for 7 years, and a bankruptcy for 10

The truth is that for those who qualify, Bankruptcy may eliminate credit card, medical and other consumer debts and judgments, stop pending and threatened lawsuits, foreclosures, garnishments and harassing telephone calls and letters from debt collectors and provide a fresh financial start!

Factors in qualifying for Chapter 7 Bankruptcy include level of income and amount of assets Qualifying homes, retirement accounts and other important exemptions are generally not counted towards assets in Florida, allowing many consumers to keep what they own and complete the entire bankruptcy process in as little as 90 days So, when financial problems seem overwhelming, the good news is that the first step to solving debt problems may be the easiest one – finding out your options are taking control of your future

Also, individual debtors who have regular income may also seek an adjustment of debts under chapter 13 of the Bankruptcy Code An advantage of Chapter 13 is it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to "catch up " past due payments through a payment plan Moreover, the court may dismiss a Chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of Ch 7

If the debtor's "current monthly income" is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the Chapter 7 filing is presumptively abusive Abuse is presumed if the debtor's aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $12,850, or (ii) 25 percent of the debtor's non-priority unsecured debt, as long as that amount is at least $7,700 The debtor may refute a presumption of abuse only by indicating special circumstances that justify additional expenses or adjustments of current monthly income Unless the debtor overcomes the presumption of abuse, the case will generally be converted to Chapter 13 (with the debtor's consent) or will be dismissed