Pros and Cons of Filing Bankruptcy in Florida


The decision to file for bankruptcy is a significant one that can affect your life in profound ways. In some ways itโ€™s devastating, but in most cases, it has helped millions of people get out of financial trouble, repay debts, and get many debts discharged in the process.

That said, itโ€™s essential to understand the pros and cons of filing bankruptcy in Florida, specifically under Chapter 7 and Chapter 13, as it can help guide you in making the best decision for your financial future.

Not sure if Bankrutpcy is right for you? Contact Ziegler Diamond Law today for a free consultation about your bankruptcy case. Continue reading to learn more about the benefits and drawbacks of filing bankruptcy.

General Bankruptcy Pros and Cons

Filing for bankruptcy is a significant decision in your financial life. That said, whether youโ€™re filing Chapter 7 or Chapter 13, there are a few general pros and cons to consider. They include but arenโ€™t limited to the following:

Pro: Automatic Stay – Regardless of the chapter, an automatic stay is issued immediately upon filing. This can give filers much needed relief from all aggressive collection action like lawsuits, wage garnishments, and calls from creditors.

Con: Impact on Your Credit – You can think of bankruptcy as taking one step backward today in order to take a lead forward in the future. That said, bankruptcy will remain on your credit report for 7-10 years depending on the type field and will significantly impact your ability to obtain credit at fair interest rates.

Pro: Total Debt Discharge/Restructuring – Depending on if you file for Chapter 7 or 13, your debts can be totally wiped out (Chapter 7), or restructured in Chapter 13 allowing you to make affordable payments on all or portions of your debt. Learn more about each in the following sections.

Con: Stigma – No matter how you slice it, thereโ€™s a stigma (and a public record) attached to bankruptcy. However, the stigma is not the reality. Under the right circumstances, filing bankruptcy can help put you and your family in a much better financial situation.

Continue reading to learn more about the specific pros and cons of Chapter 7 and Chapter 13 bankruptcies in Florida. Need help deciding which option is best for you? Contact us to speak with a bankruptcy lawyer you can trust.

Chapter 7 Pros and Cons

Pro: Fresh Start

Filing for Chapter 7 bankruptcy is like taking a much-needed breath of fresh air. It gives you the chance to shake off many of your unsecured debts and start afresh. Those intimidating credit card balances? Gone. Those relentless medical bills? Wiped out. It’s like getting a do-over for your financial life.

But hold up, it’s not a complete sweep. Some debts are stubborn and don’t disappear that easily(i.e., non-dischargeable debts). Think of things like student loan debt, some tax dues, or child support payments. These stick around even after Chapter 7. So while it offers a new beginning, remember, some bills will keep knocking at your door.

Con: Non-exempt Property Liquidation

A significant drawback of Chapter 7 bankruptcy is the potential for property liquidation. Assets deemed non-exempt by the bankruptcy court may be sold to pay off your creditors, which might include extra vehicles, valuable collections, or secondary residences.

In most cases, those filing Chapter 7 get to keep most of their home, car, and other types of personal property (up to a limit) due to exemptions.

Pro: Quick Resolution

Another advantage of Chapter 7 is its relatively fast process. Compared to other types of bankruptcy, a Chapter 7 bankruptcy filing can be resolved within a few months, allowing you to move on sooner. For comparison, typical Chapter 13 repayment plans usually last for three to five years. However, itโ€™s important to know that Chapter 7 bankruptcies stay on your credit for 10 years.

Con: Qualification Limitations

To qualify for Chapter 7 bankruptcy, you need to pass a “means test,” which takes into account your income, expenses, and family size. If you don’t pass , you may need to file for Chapter 13 bankruptcy instead. Hereโ€™s as snapshot of the Chapter 7 means test formula:

  • Step One – Calculate your monthly income
  • Step Two – Calculate your annual income
  • Step Three – Compare your income to households of the same size in Florida

If your income is less than the average for your family size, then you automatically qualify for Chapter 7. However, if itโ€™s more, youโ€™ll need to complete the official Means Test Calculator form to see if you qualify.

Pros and Cons of Chapter 13 Bankruptcy

Pro: Retaining Property

The key advantage of Chapter 13 bankruptcy is that you get to keep all your property, including non-exempt assets. You repay your creditors through a court-approved payment plan, which lasts three to five years. Depending on your income, you may only have to pay a portion of your debt. But, filers with a high enough income may be required to pay their financial obligations in full.

Con: Length of Time

Bankruptcy proceedings under Chapter 13 take much longer than Chapter 7. The entire repayment plan can stretch up to five years, during which time you must live under the court’s supervision. However, one โ€˜proโ€™ of Chapter 13 bankruptcy is that it only stays on your credit seven years from the filing date.

Pro: Possibility to Reschedule Secured Debts

With Chapter 13, you can reschedule certain secured debts, potentially lowering payments. Further, you may have the opportunity to cram down certain secured debts, such as car loans and potentially some mortgages, reducing the debt to the property’s value and modifying the interest rate.

Pro: Opportunity to Pay Off Non-dischargeable Debts

Chapter 13 allows the repayment of non-dischargeable debts like missed mortgage payments, child support obligations, or tax obligations over the life of the plan. However, in most cases, youโ€™ll have to pay down your non-dischargeable debts fully to receive a discharge at the end of your repayment plan.

Con: Limited Financial Freedom

During your repayment plan under Chapter 13, you must seek the court’s permission to incur new debt or make substantial financial decisions. This can limit your financial freedom over several years. Your bankruptcy attorney can work with you to potentially amend your plan and request the courts amend your plan to include new debts.

Speak With a Florida Bankruptcy Attorney About Your Options

Bankruptcy laws can be complex, and the process can be stressful and confusing. It’s crucial to speak with an experienced bankruptcy attorney who can guide you through the process, clarify your bankruptcy options, and help determine the best solution for your financial situation.

Remember, filing bankruptcy is not a failure but a tool to regain control of your financial life. Contact Ziegler Diamond Law for your free consultation with a bankruptcy lawyer in Florida โ€“ Let us help you take the first step on your journey to survive bankruptcy and gain financial stability.

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