The decision on whether or not to file some sort of bankruptcy is a big one and it will affect your finances and credit for years to come. And although the number of bankruptcies filed has been dropping in recent years, there were still over 800,000 filed in the year 2016 in the U.S. Bankruptcy in Florida, which makes it a very busy place. In January of 2018, the bankruptcy court in Orlando had 1203 Chapter 7, 26 Chapter 11 and 529 Chapter 13 cases for a total of 1758.
But how do you know if you should be filing for bankruptcy? If you feel like your bills and/or debt is just too much for you to handle currently, you may want to consider it. But before you decide, there are a few more questions you should ask yourself.
Will Bankruptcy Help Your Situation?
It may seem like a simple and obvious question, but you really have to be sure that where you see yourself after bankruptcy is a better place than where you are now. As mentioned, bankruptcy will have a major impact on many aspects of your life; make sure you know what you want to accomplish and have clear goals for where you want your life to be after bankruptcy, if you choose to go that route. Also decide if you want to hire an affordable bankruptcy attorney, and if so how will you find reputable bankruptcy attorneys.
Is There Another Way?
Because it has such a major effect on your finances, bankruptcy should be considered a last resort. Is there another way to get out of the financial hole that you are in? Can you work more, maybe get another job? Reduce your expenses? Can any of your debts be refinanced? What if you created and stuck to a budget? You can start by taking the bankruptcy quiz: Are you headed for disaster?
According to an article in US News and World Report, filing bankruptcy is a life-altering experience. However, there are some common myths: Filing bankruptcy doesn’t mean a person was irresponsible, life happens; medical bills pile up, jobs disappear, and even natural disasters where insurance is inadequate can out a person’s finances in the red.
There are other alternatives including: Debt consolidation where a person settles, or negotiates their debts with creditors: Selling property, borrowing money from family and friends; restricting a mortgage, or making a leader budget, and sticking with it religiously.
Be aware though that some studies show that if not done properly, those who try and avoid bankruptcy many times end up worse off than those who filed. And those who filed bankruptcy saw an improvement in the credit scores sooner then those who had worked on bringing down their debt without court action.
According to a study from the Federal Reserve Bank of New York, people who filed bankruptcy had access to new lines of credit sooner than those who didn’t:
“For each quarter, we present the average number of new unsecured accounts four quarters later for individuals who become insolvent in that quarter but will not go bankrupt, compared to individuals who go bankrupt in that quarter. Clearly, individuals who do go bankrupt open a larger number of new unsecured accounts. Since the number of inquiries is very similar across the two groups, this outcome is not driven by difference in demand for new accounts, but rather by difference in access to credit.”
And those who filed saw an improvement in their credit score sooner:
“The individuals who go bankrupt experience a sharp boost in their credit score after bankruptcy, whereas the recovery in credit score is much lower for individuals who do not go bankrupt.”
In conclusion the study found:
“Moreover, we show that insolvent individuals who do not go bankrupt exhibit more financial stress than those who do, suggesting that these individuals would likely prefer to file for bankruptcy if they could afford it.”
Just remember: Filing bankruptcy is not the end, it is a chance for a fresh start. It is a law written for people who have no other way to eliminate the financial burdens, that many times are not even their fault.
Do You Qualify?
While things may seem bleak from your perspective, there are eligibility requirements when it comes to filing for bankruptcy. For example, whether you are eligible for bankruptcy depends heavily on income (for filing Chapter 7) and the amount of debt you owe (for filing Chapter 13).
Should You File Chapter 7 or Chapter 13?
The vast majority of bankruptcy filings in the U.S. are of the Chapter 7 variety. The process is much shorter (3 to 6 months) and involves the liquidation of some property to pay debts, while much of your other debt is wiped away. If your income is nowhere near enough to meet your debt obligations, Chapter 7 may be an option. You can use an online bankruptcy means test to see if you qualify. To be sure, your credit will take a major hit and it will take you years to rebuild it, but if you can see yourself in a better position after bankruptcy filing, then it might be something to consider.
Chapter 13 bankruptcy is a longer process (3 to 5 years) and is used by those who have enough income to pay their debts; they just need time. Chapter 13 can delay debts and foreclosures and give you time to catch up on your payments.
Other Things to Consider
Before you decide to start the bankruptcy process, there are other things to consider. What debts would be paid off? What will happen to your property? Will going through the process be beneficial when is all said and done? What happens when you file for bankruptcy in Florida? How do I file for bankruptcy in Florida?
It’s a lot to figure out. There are many questions as to what happens when you file for bankruptcy in Florida. if you have questions about filing for bankruptcy in the Orlando area, contact the attorneys at Badgley Law Group or call 407-781-0420 for a consultation. Our firm prides itself on being one of the best Florida bankruptcy lawyers and you will find that lawyer fees for bankruptcy are more affordable than you might think.