If you are thinking about filing for bankruptcy, there are many things you should take into consideration. There are both pros and cons associated with filing for bankruptcy, and it is important that you understand what those are so you can know what to expect once your case is over. Below are the benefits and disadvantages you may find after filing for either Chapter 7 bankruptcy or Chapter 13 bankruptcy. If you are still unsure if filing for bankruptcy is right for you, it is important to speak to a Florida bankruptcy lawyer who can review your case and advise on what option is best for you.
Debts Are Discharged
The biggest benefit you will receive from filing for bankruptcy is that some of your debts may be discharged. This means that a bankruptcy court will issue a permanent order that stops creditors from trying to collect debts that you had prior to filing for bankruptcy. This is the main benefit people think of when they file for bankruptcy, and why they do it.
It is important to understand that bankruptcy will only typically discharge certain types of debt. Credit card debt is the biggest type of debt that is discharged through bankruptcy. However, it is also possible to have auto loans and other types of debt discharged through bankruptcy.
Bankruptcy also will not discharge certain debts. Financial responsibilities such as alimony and child support are not discharged through any type of bankruptcy, as these debts are considered too important to simply forgive. However, through a Chapter 13 bankruptcy, you may be able to restructure these debts by forming a repayment plan that is more feasible for you.
Stop Creditors from Calling
As soon as you file for bankruptcy, debt collectors and creditors are no longer allowed to call or harass you in regards to your debt. In reality, creditors are never allowed to harass you. However, when you file for bankruptcy, creditors cannot even call or email you. This is called an automatic stay and is another big benefit that comes from filing for bankruptcy.
The bankruptcy courts issue an automatic stay and, once they do, it will typically remain in effect until there has been a decision made on your bankruptcy case. If your debt is discharged, the debt collectors will not call you again about your debt because it has essentially been forgiven.
Sometimes, an automatic stay may be lifted before a decision is made regarding your bankruptcy case. For example, if an automatic stay is protecting your property, an automatic stay may be lifted if the property is worth more than the debt owed on it. Additionally, divorce proceedings can also interfere with an automatic stay and make the situation more complicated.
Your Credit Score Will Be Negatively Impacted
While getting debt discharged and having an automatic stay are certainly the biggest benefits that come with filing for bankruptcy, there are some downsides as well. One of the biggest negative impacts that come with filing for bankruptcy is that your credit score will take a substantial hit. After a decision is made about your bankruptcy case, your credit score may drop 100-200 points or more. Additionally, even if you received a discharge on your debt, it does not mean that those debts are erased from your credit report. They will still appear, only your credit score will be much lower.
After your credit score takes this hit, it will make it much more difficult to get a loan from any lender. If you are able to take on more debt, it will likely be at a very high interest rate because lenders will now consider you a high-risk borrower.
Although no one wants to think about suddenly having a much lower credit score, it is important to remember that you can rebuild it. Also, while bankruptcy does negatively impact your credit score, so does have a lot of debt.
The Records Are Public
One negative impact that many people do not consider when they file for bankruptcy is that the records become public. This happens as soon as you file for bankruptcy, and allows any member of the public to access your information.
Some individuals would rather struggle with debt than have their friends, family, clients, and potential employers learn about who they owe debt to, and how much debt is owed. For others, allowing the information to go public is still worth filing for bankruptcy because certain information is kept private. For example, your Social Security number will never be public information.
Loss of Property
If you file for bankruptcy, particularly through Chapter 7, there is a very good chance that you will lose your property. If you own a very expensive vehicle, for example, the court will seize this in order to help pay off your debt. In certain cases, some of your property may be considered exempt and as such, the bankruptcy trustee will not be able to use it to pay off your debt. In other cases, your property may not be profitable enough to seize for sale. For example, if it will cost more to sell a certain asset than what the asset is worth, a bankruptcy trustee will likely determine that it is not worth it to sell and will allow you to keep the property.
Want to Learn More About Bankruptcy? Call Our Florida Bankruptcy Lawyers
If you are considering filing for bankruptcy, you likely have a lot of questions, including whether or not it is worthwhile to do so. At Loan Lawyers, our Fort Lauderdale bankruptcy attorneys can advise on your situation and outline the options available. If you choose to file for bankruptcy, we will help you through every step of the process to ensure you can protect what is yours. Call us today at (954) 523-HELP (4357) to schedule your free consultation and to learn more about how we can help.
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.