Which Chapter Of Bankruptcy Should I File?

Which Chapter Of Bankruptcy Should I File?


The appropriate chapter of bankruptcy depends on a variety of circumstances having to do with the consumer, such as their income, expenses, their debts, and what they seek to accomplish through bankruptcy. Generally speaking, the liquidation form of bankruptcy is a better fit for consumers with more modest income and whose debt problems are more related to unsecured debts (credit cards, personal loans and medical obligations). In contrast, chapter 13 is a better fit for consumers with higher-than-median income who may have debt problems related to secured debts, such as a mortgage or car loan.

Can I Ever Get A Mortgage Or A Car Loan After I Have Filed For Bankruptcy?

Consumers can absolutely get a mortgage or a car loan after they file for bankruptcy. A common misconception is that a consumer’s credit score is in the toilet for 10 years after they file for bankruptcy. It is important to be aware that the bankruptcy filing can be reported on a credit report for up to 10 years and moreover that bankruptcy (in isolation) has a negative impact on credit. However, a credit score takes into account much more than just bankruptcy, and we typically find that with the benefit of wiping out the debt, within about two years, a credit score will often be at the same or better standing than when the consumer started filing for bankruptcy. As a complimentary offering to our clients, our law firm subscribes our clients into a program to help educate them on legitimate ways of rehabilitating their credit score after the bankruptcy is concluded. Most consumers can get a new car loan almost immediately after a chapter seven bankruptcy is complete, although the terms may not be as advantageous as one would like to see. A consumer can generally obtain a new mortgage about two years after a bankruptcy filing if they otherwise have qualifying income and other criteria.

Will My Credit Ever Improve After A Bankruptcy?

A consumer’s credit will absolutely improve after a bankruptcy. A common misconception is that credit is impaired for 10 years after the bankruptcy is filed. While it is correct to say that the bankruptcy will appear on the credit report for up to 10 years, it usually only takes about two years for a credit score to rehabilitate to the same or a better score than when the consumer started.

How Can Bankruptcy Affect Senior Citizens Or Older Populace?

There are a lot of seniors who face debt issues as they make the transition from the income during their working years to a more modest, fixed income after they have retired. A lot of times, this can create complications as the income and expenses adjust to each other. Seniors can be what we call “collection proof,” meaning that there may be little or no assets that a creditor can collect upon. The collection process can create anxiety, frustration and embarrassment. Bankruptcy can offer a good option of “cleaning house” by discharging all unsecured debts and reducing a senior’s monthly expenses so that they can better adjust to their fixed income.

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Are My Retirement Accounts Exempt In A Bankruptcy?

Generally speaking, accounts that are “qualified” by the IRS, such as 401(K)s, IRAs, and pensions are exempt assets in a bankruptcy. “Exempt” is the term that we use in the bankruptcy process to say that a person can keep the assets after the bankruptcy has been filed.

What About Social Security Benefits?

Social security benefits are considered exempt assets in the course of a bankruptcy filing.

Can I Go For Debt Consolidation Instead Of Filing For Bankruptcy?

For some consumers, debt consolidation can offer a helpful option to control their debts. However, there are some considerations that a consumer should be aware of in comparing debt consolidation versus bankruptcy. First, consumers should be aware that debt consolidation typically is not a guarantee. In common debt consolidation arrangements, the debt consolidator is basically acting as a negotiator on the consumer’s behalf, working directly with the creditors to see if they are willing to reduce the amounts that they are charging to the consumer. As with any negotiation process, there is no guarantee of outcome. In fact, we’ve been contacted by a number of consumers who were making their payments to the debt consolidation company with the expectation that all of their debts were being paid through the debt consolidation payment, when lo and behold, they would be sued by one of the companies that they thought was being addressed through debt consolidation.

In contrast, bankruptcy is a court structured program, and although there can be some areas of uncertainty (and under professional rules, we’re not allowed to offer guarantees of outcome), the law on bankruptcy is firmly written and firmly structured. Furthermore, generally we are not negotiating with the creditors in bankruptcy; we are simply meeting the terms of the law in order for the bankruptcy petition to comply. On many occasions, the out-of-pocket expense for a bankruptcy (particularly for a chapter 7) may be substantially less than what a consumer would pay through debt negotiation. However, the actual out-of-pocket expense will vary depending on a number of circumstances, such as exempt property and whether the consumer qualifies for chapter 7 versus chapter 13. In summary, a consumer should educate themselves on all of their options in order to evaluate their total costs and their anticipated outcome.

What Should I Do To Get My Life Back On Track After Filing A Bankruptcy?

The most important thing a consumer can do after their bankruptcy is to focus on their credit. First, they want to make sure that from a credit reporting standpoint, they are getting the benefits that they are entitled to as a result of the bankruptcy discharge. The consumer should review their credit report (preferably with an attorney) in order to make sure that their debts are appropriately reflecting a “$0” balance and discharged. The second half of the equation is to start rebuilding credit to make sure that the consumer is getting the best deals on future lending, and that they’re not spending unnecessary costs to take out loans. As part of our representation, we offer a complimentary subscription in a credit rehabilitation education program to help consumers use legitimate means to improve their credit scores.

For more information on Suitable Chapter of Bankruptcy In Florida, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (727) 538-4188 today.

Call Now for a Free Case Evaluation
Clearwater: (727) 538-4188 | Tampa: (813) 225-3111