What 5 Things Should You Know before Filing for Bankruptcy?
Filing for bankruptcy protection is a significant decision, and one our clients do not make lightly. As experienced attorneys, we make sure our clients fully understand what will happen in bankruptcy along with the alternatives. Below are 5 facts you should be aware of before filing your paperwork.
Know Which Debts Will Get Discharged
Bankruptcy cannot eliminate all debts. You should know exactly what debts will be eliminated before you decide to go ahead with your filing. For example, your unpaid child support and alimony payments? Those will survive any bankruptcy discharge, so don’t file for protection if those are the debts you want to wipe out.
Generally, bankruptcy is good at eliminating certain unsecured debts, such as medical debt, personal loans, and credit card debt. Any loan secured by collateral will not be discharged either.
Know if You Will Lose Personal Property
One disadvantage of filing a Chapter 7 liquidation is that the trustee will sell non-exempt property. Fortunately, Florida has some generous exemptions. In many cases, people can exempt the entire value of their home. Other items are exempt, like health care equipment, and there is a wildcard you can use on anything you want. However, if there is a lot of property you will lose, then you might want to choose a Chapter 13 bankruptcy instead.
Know How Much Bankruptcy Costs
You should discuss fees with your lawyer when you first meet, and they should provide a fee agreement in writing so there are no surprises when it comes to paying for your bankruptcy.
Know How Your Credit Will Be Affected
Bankruptcy’s effect on your credit depends on several factors. For example, how good is your current credit? It is possible to have a score in the 700s but be teetering on insolvency. If so, then you will see a significant drop; usually more than 200 points. However, if your credit is already in the tank because you have multiple defaults, then your score won’t drop too much. Talk about how you will be able to rebuild your credit with your bankruptcy attorney.
Know the Alternatives to Bankruptcy
To make an informed choice, you need to realize which options are available instead of filing for bankruptcy:
- You can simply walk away from your loans. Of course, if you own assets, you could lose them if the creditor sues you and gets a court judgment in their favor.
- Debt settlement. You might try to save up a lump sum and then negotiate payment with creditors. In exchange for, say 60% of the face value of the debt, they agree to wipe out the rest. This isn’t always successful, and most people need to stop making payments to save up the lump sum.
- Credit counseling. A counselor might be able to get late fees or penalties waived and a reduction in your interest rate. This might be enough to allow you to pay off your debt, though it is not a good option for those who are swamped with bills.
At Nowack & Olson, our Plantation chapter 7 bankruptcy attorneys will ensure you are properly informed of the above before we file bankruptcy paperwork on your behalf. To get started on your case, please call 888-813-4737 to schedule a free initial consultation.