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4 Bummers About Bankruptcy


No one goes to bankruptcy court expecting that filing for bankruptcy will feel like taking a victory lap, but many applicants go into the bankruptcy process with an excess of optimism.  Bankruptcy will take away some of your debts, but only if you hold up your end of the bargain, and even then, you will still be responsible for repaying your debts which are not dischargeable in bankruptcy.  These are some examples of unintended consequences of successful bankruptcy filings and of some things that can go wrong and prevent you from getting the maximum debt relief from your bankruptcy case.  To avoid mistakes and complications with your bankruptcy case, contact a Miami chapter 13 bankruptcy lawyer.

The Court Can Make the Unilateral Decision to Change Your Case From Chapter 13 to Chapter 7

In a chapter 7 case, the debts get discharged quickly, but the court can liquidate some of your assets and apply the proceeds toward debt settlement.  Necessities like your house and your car are exempt from liquidation, so many chapter 7 bankruptcy cases resolve without any assets being liquidated.  In a chapter 13 case, there is no risk of liquidation of assets.  Instead, you agree on a settlement amount and pay it in installments over several years, at the end of which the court discharges the remaining balance of your eligible debts.  If you do not keep up with your chapter 13 payment plan, though, the court has the right to convert your case to chapter 7, putting your property at risk of liquidation.

A Bankruptcy Filing Can Be a Hard “No” for Some Mortgage Loans, Not Merely a Negative Mark on Your Credit Report

It is common knowledge that bankruptcy filings stay on your credit report for a long time, but it is possible to rebuild your credit score gradually.  If you want to apply for an FHA mortgage loan, though, you must wait at least two years from your most recent bankruptcy filing, or else the lender will respond with an automatic “no.”

The Court Can Liquidate Your Assets Without Discharging Your Debts

In a chapter 7 case where everything goes well, the court discharges all of the borrower’s eligible debts, with or without liquidating non-exempt assets.  If you are not truthful or accurate on your bankruptcy filing documents, though, the court has the right to deny discharge of some or all of the debts for which you are requesting discharge.  Once you have filed for chapter 7 bankruptcy, though, the court still has the right to liquidate your non-exempt assets, regardless of how much or how little of your debt it discharges.

Rich People Will Have an Easier Time With Bankruptcy Than You Do

Many aspects of filing for bankruptcy are easier the higher your income is.  If you own non-exempt assets, you can file for chapter 13 and keep up with the payments.  Likewise, the higher your income, the more easily you can rebuild your creditworthiness.

Work With a Debt Lawyer About Avoiding Obstacles to Debt Relief

A South Florida debt lawyer can help you ensure that your bankruptcy case goes smoothly.  Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.



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