The number of individuals and businesses in the US filing for bankruptcy is on the rise, with a total of 418,724 filings as of June 2023. The 10% increase in non-business filings makes this seem a common occurrence in the modern economy, but it is still usually one of the hardest decisions a person will have to make when faced with the reality of their inability to pay their personal debts as they come due.
There is a mix of feelings associated with a financial crisis, so if you are unable to pay your debts you need to stay level-headed and examine all the factors surrounding your situation and consider the solutions available to you. One of the solutions you may want to consider is hiring a bankruptcy attorney in Miami.
Let’s explore the positive and negative aspects of filing for bankruptcy and what it entails for your financial future.
When you hit a financial wall and can’t manage your debt any longer, it’s usually time to declare bankruptcy. It will help to you save your home and other exempt assets and relieve the pressure you are under, allowing you to function normally both financially and in your everyday life.
- Relief from creditors: Declaring bankruptcy triggers a provision in the law known as the automatic stay. It prevents all creditors from doing anything to attempt to collect debts against you while you are in bankruptcy.
- A chance to preserve assets: The automatic stay also shields your assets from foreclosure, levy, and garnishment. It is intended to give you the breathing room you need to save your home, your car, your bank accounts, and other assets while you are in bankruptcy.
- Protection for future earnings: Filing bankruptcy also helps you protect your future earnings from involuntary garnishment by creditors so that you can use those earnings to pay your living expenses and non-dischargeable assets such as child support and alimony.
- Peace of mind: While you are in bankruptcy, all your creditors and their collection agencies are forbidden from disturbing you in any way. This means no more phone calls! No more emails! No more lawsuits! And no more anything that is an attempt to collect a debt!
- Most debts can be discharged: In bankruptcy, most debts, like credit cards, personal loans, automobile repossession deficiencies, medical bills, old phone and cable TV bills, and IRS debts older than 3 years are discharged in the bankruptcy process.
- A new chance at life: Perhaps, the most significant benefit of declaring bankruptcy is the least tangible one. You’ve probably spent long days and sleepless nights trying to figure out how to get out of debt and feeling the crushing pressure of your dire financial circumstances. But with bankruptcy, you can breathe more easily again knowing that the harder times are behind you.
Not all people who file bankruptcy are able to just walk away from their debts. Some debtors are required to make payments to their creditors because (i) they have higher than average income, (ii) they have non-exempt assets, or (iii) they have made avoidable transfers of valuable assets to friends or family members (typically) within 4 years of filing for bankruptcy. If you are required to make some payment to your creditors, however, it is almost always much less than what you would have to pay them outside of bankruptcy.
Here are some other common downsides of filing for bankruptcy:
- If your credit score is still high, filing bankruptcy will hurt it: While it is true filing bankruptcy can hurt your credit score, this is not necessarily so if your credit score has already been battered by your inability to pay your credit cards for as little as 3 or 4 months.
- Obligation to pay something to creditors: As discussed above, you may be required to pay something to your creditors to protect your non-exempt assets or friends and family members with whom you have had avoidable transactions shortly before bankruptcy.
- Not all debts are discharged: While it is true that some debts are not discharged in bankruptcy, eliminating your dischargeable debts will better enable you to handle your debts that are not affected by the bankruptcy.
- Difficulties in buying a home: Under current FNMA Guidelines, you will have to wait two years after your bankruptcy discharge to be able to qualify for a conforming mortgage loan, the type of loan with the lowest interest rates. However, most people who are unable to pay their bills and are considering bankruptcy will not qualify for a mortgage if they don’t file a bankruptcy because the banks will not loan to people who have a lot of unpaid debts and the inability to pay them. In those cases, bankruptcy is a necessary first step to get your financial house in order to begin to be able to save money for a down payment and qualify for a home mortgage a few years down the road.
Consult a Bankruptcy Attorney in Miami
The Bankruptcy Law Offices of James Schwitalla, P.A., can analyze your situation, explain to you the process of filing for bankruptcy, answer your questions, take you through the bankruptcy process and be with you every step of the way. Since 1992, Mr. Schwitalla has helped thousands of people facing financial distress, and he and his team would like to help you during these difficult times! Click here: —–àto contact our team now! We will take some information from you over the phone and schedule an in-person, phone, or Zoom consultation so you can learn the pros and cons of your potential bankruptcy case.