Struggling with debt is extremely difficult and when you feel that you are in too deep and that you cannot pay it off, you may consider filing for bankruptcy. Although it is a last resort, bankruptcy can bring relief from the financial pressure you are feeling and can stop the constant calls from different creditors. However, filing for bankruptcy is still a big step and the process is complex. Before you file, there are seven important things to know about the process and about how you will fare once your bankruptcy case is over.
1. Bankruptcy Is a Long Process
Many people assume that bankruptcy courts operate similarly to small claims court, which only takes one day for a case to be finalized. Unfortunately, the process takes much longer than that. The bankruptcy courts vastly differ from small claims courts, even though each deals with debts owed by borrowers.
Chapter 7 is the most common type of bankruptcy filed by individuals and the process typically takes between four and six months. If you are filing for Chapter 13 bankruptcy, the process is even longer. During a Chapter 13 bankruptcy, your debts are restructured in a manner that helps you pay them off over an extended period of time. Your case is not considered over until the end of that repayment plan after you have paid back all or most of the debt. This typically takes three to five years.
2. Bankruptcy Is a Public Affair
Many people do not even like discussing their salary with friends and family, never mind having their entire financial life on display. Unfortunately, that is exactly what happens during bankruptcy. Bankruptcy records are public, which means anyone that wants to view them can. During the bankruptcy process, you will also have to file the bankruptcy schedules, which is an enormous amount of paperwork that itemizes your debts, income, assets, expenses, and your most recent financial transactions. These schedules also become public record.
Additionally, you are also required to attend a meeting of the creditors during the bankruptcy process. The meeting is held in a public room and the creditors you owe can ask you questions. The bankruptcy trustee assigned to your case will also ask some in-depth questions that will require you to provide details about your financial life that, up until this point, have remained private.
3. You Must Remain Completely Honest at All Times
Even though you may find the meeting of the creditors and other aspects of the bankruptcy process embarrassing, you must remain completely honest at all times. If you do not disclose all of the information or are dishonest about it, the bankruptcy court will not discharge your debt. Even worse, you may face charges of bankruptcy fraud, which is a serious federal offense that carries harsh consequences for individuals that are convicted.
4. The Process Is Complex
Many people assume that filing for bankruptcy is as easy as simply filling out a form. Unfortunately, it is much more complicated than that. Although there are forms to fill out, the questions within those forms are not a simple matter of answering questions. Rather, the forms bear more resemblance to the forms you use for your tax return.
The most important, and the most complex, forms to fill out during bankruptcy are Schedules A through J, along with the Statement of Financial Affairs. It is crucial to work with a bankruptcy attorney who can help you understand these forms before you fill them out, and that can help ensure you have all the necessary information.
5. Bankruptcy Only Protects You
It may seem like common sense to consider that only your debts are discharged during the bankruptcy process. However, many people are surprised to learn that while they are no longer responsible for certain debts, those debts are not completely discharged. This occurs most commonly when there is a co-signer on a loan. For example, if you and one other person are named on the mortgage for your home and you file for bankruptcy, you are no longer responsible for the mortgage debt. Still, if the other person named on the mortgage defaults on the loan, the lender can still attempt to collect the debt from that person.
6. Bankruptcy Will Hurt Your Credit for Years
You may understand that filing for bankruptcy will affect your credit score, but so many people are unaware of just how long this consequence lasts. Bankruptcy will remain on your credit report for seven years, which will make it more challenging to secure a loan or credit.
It is vital though, that during this time, you try to improve your credit score. This may seem impossible, due to the fact that there is nothing you can do to remove the bankruptcy from your credit report. Fortunately, there are many creditors that will allow you to take out a loan or that will offer you a credit card. These tools can help you rebuild your credit, but you must carefully scrutinize the terms of any debt. Most creditors that make these offers do so in order to charge very high-interest rates and if you accept one of these, it could hurt you in the long run.
It is also important to remember that while bankruptcy will remain on your credit report for seven years, your credit will likely start to rebound after just two years.
7. Our Florida Bankruptcy Lawyers Can Help with Your Case
Bankruptcy can bring much relief from creditor calls and the stress of knowing how much debt you carry. However, the process is extremely complex and one small mistake could ruin your chances of having your debt discharged. At Loan Lawyers, our Fort Lauderdale bankruptcy lawyers are here to help. We will advise on the law as it pertains to your case, help you navigate the system, and give you the best chance of a positive outcome. If you are struggling, call us today at (954) 807-1361 or contact us online to schedule a free consultation so we can discuss your case.
Visit our bankruptcy page for more information.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.