What Will Happen to Me If I File for Bankruptcy?

Many people could benefit from bankruptcy but hold off due to the fear and misconceptions surrounding bankruptcy. Clearing up the myths and breaking down the bankruptcy process can help you feel a little more confident and secure when taking that next step.

Protections of the Automatic Stay

At the start of your bankruptcy case, as soon as the filing is made, the bankruptcy court will issue what is known as the “automatic stay.” The automatic stay gives you immediate relief from any collection actions against you. This should come as a huge relief, especially if you are fielding multiple calls a day from debt collectors. The automatic stay keeps debt collectors from going after money in your bank account or garnishing your paycheck to satisfy the debt. This stay continues for the duration of the bankruptcy case until discharge is granted or the case is dismissed.

Bankruptcy Exemptions

Filers often tell me the one thing holding them back from pursuing bankruptcy is the fear of losing everything they own. It often depends on the type of bankruptcy case you are pursuing, whether it be a Chapter 7 bankruptcy or Chapter 13 bankruptcy. A Chapter 7 bankruptcy case is referred to as a liquidation bankruptcy, and it involves you selling off some of your assets to pay off a portion of the debts you owe. Not all assets are fair game, however.

Bankruptcy exemptions allow you to keep certain assets safe from liquidation, including your house, car, and retirement accounts. Florida offers some of the most generous bankruptcy exemptions in the country, allowing filers to keep a great deal of what they own while taking advantage of the bankruptcy process. Most people we file here in our Orlando and Kissimmee office do not lose anything but their debts.

If you are pursuing a Chapter 13 bankruptcy, also known as a reorganization bankruptcy, you are working directly with the bankruptcy trustee to create a repayment plan. We handle everything with them, so you do not have to. The process takes anywhere from three to five years, and any debts that are still there at the end of the case are discharged. With a Chapter 13 bankruptcy case, you keep all your assets, especially if they are being used as collateral for a secured debt. So as long as you keep up with your repayment plan, you will be able to keep most of what you own.

So what is a Chapter 13 bankruptcy?

It is a reorganization of debt through the federal government. Our job is for you to pay at little as possible back to your creditors. For example, after we determine your income and expenses, let’s say we set up a plan paying back 15% of your debt back to creditors over 5 years. When the plan is completed, the remaining is 85% of debt will be discharged.

Impact to your Credit Score

After filing for bankruptcy, your credit score will be impacted. But sometimes, in the positive. I know – I know. Like Arnold from Different Strokes use to say, “Whatcha talking bout Willis?” You see, when you file bankruptcy, all your balances are zeroed out so that artificially inflates your credit score higher. The bankruptcy reporting reduces your score. Sometimes, especially if you have a lot of debt, the score doesn’t go down that much.

The dip in your credit score should not deter you from filing, however. In fact, the ramifications from delaying the filing can often be worse than the consequences of the bankruptcy. Having multiple defaults on your credit report, missed payments and collection attempts can lead to an even bigger drop in a person’s credit score.

And never, ever hire a debt management company like a Credit Counseling or Debt Settlement company. You will find your self being sued by creditors that DO NOT work with these companies and you may end getting ripped off like all these people here.

Not to mention there are serious tax penalties for working with debt settlement companies. Just don’t do it. It is the kiss of death to have MANAGED BY DEBT COUNSELING AGENCY in your credit report.

Once the bankruptcy discharge is issued and you are free from your unsecured debts, your credit score can be rebuilt with good financial habits. It is very possible to be approved for financing in the future and achieve a better credit score. We always recommend filers keep a close eye on their credit reports after a bankruptcy case is over and successfully closed. Free credit reports are available annually to all consumers.

If you have questions on this topic or are struggling with debt, call our law firm today to schedule a free consultation. Having debt makes you stay up at night. It stresses you out. It ruins relationships. I went through it. I found the courage to call a bankruptcy attorney and I pressed the restart button in 2008. I never forgot what it did for me and how it helped me start over.

To date, The Benenati Law Firm  has eliminated nearly a billion dollars of debt for its bankruptcy clients. Our firm is the largest filer of consumer bankruptcy cases in the nation. Go to https://www.407bankrupt.com/ or call 407-777-7777 to set up a free private consultation. Because Life Has a Restart Button.