Should You File for Bankruptcy? - By: Richard Tansky

Bankruptcy is legal process handled in federal court in which a debtor declares that they are unable to pay off their debt. It is every citizen’s constitutional right to declare bankruptcy. There are three bankruptcy district courts in Florida: Northern, Middle and Southern. A debtor must file for bankruptcy in the district their region of residence corresponds to. In order to be eligible to file, you need to have lived in Florida for at least two years prior to the date of filing. If you haven’t, then the better part of 180 days should be spent in Florida. The most common types of bankruptcy for consumers are referred to as Chapter 7 and Chapter 13.

In a Chapter 7 bankruptcy, also known as a straight bankruptcy, a court appointed trustee liquidates your non-exempt property, and the proceeds go towards paying off creditors. Exempt property means that it is legally protected and may not be liquidated. There are federal and state exemptions, however Florida does not allow the use of federal exemptions. Luckily, Florida has an extremely liberal exemption policy, which includes the homesteaded property, Insurance, certain money obligations such as child support, most pensions, up to $1,000 in personal property; $2,000 for a married couple, a vehicle up to $1,000, certain public benefits including social security and some of the money from wages and government employee pensions. You can even keep your credit card by, “reaffirmation”, which is basically telling creditors that you wish to keep the debt and will continue to be responsible to pay it without protection from bankruptcy. Not all debts are wiped clean by a Chapter 7, including student loans, child support and debt from taxes.

In a Chapter 13 bankruptcy, debts are restructured so that the debtor can use whatever income they receive to pay off creditors. A Chapter 13 bankruptcy can only be filed if the debtor has a steady income, and will be able to pay off past debt. Under a Chapter 13, the debtor is allowed 5 years to pay back money owed, so it is a much more gradual approach than a Chapter 7 bankruptcy. Chapter 13 has a number of advantages over Chapter 7, such as the ability to prevent your home from being foreclosed by making up delinquent mortgage payments gradually for up to 5 years. Another advantage is the ability to rearrange the payment schedule of non mortgage related debts, which can lower the payments. This type of bankruptcy is seem as slightly better for your credit, as it shows a willingness to repay debt, whereas filing a Chapter 7 wipes out debt completely.

An absolute necessity when dealing with any type of bankruptcy is to find an experienced bankruptcy attorney. An attorney who specializes in bankruptcies is more likely to have up to date information on changing laws regarding bankruptcy than a general lawyer. A good attorney can advise you as to which type of bankruptcy would suit your individual situation, as well as handle all of the paperwork, sort out assets, and guide you through the court proceedings. A specialty firm, such as Consumer Law Firm of America, (http://consumerlawfirmus.com), can walk you through the process so it is as painless as possible. They can also help you repair your credit afterward. If you are considering bankruptcy, you are probably already stressed enough as it is don’t go through the process alone, and remember that bankruptcy can give you the financial fresh start you have been looking for.

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