Bankruptcy is filed to afford a client with relief from their debts and the creditors and collection agencies or attorneys who are seeking to collect on those debts. The ultimate goal is to “discharge” the debt. The debt may be discharged either through a Chapter 7 case, in which it is likely nothing will be paid toward the debt; or through a Chapter 13 in which some portion of the debt may be paid over time before it is discharged.
A bankruptcy filing affords the client immediate relief from the creditors through an automatic stay order issued by the Federal Bankruptcy Court which automatically stops any and all collection processes (including lawsuits, foreclosures and garnishments) upon the filing of the case.
Many people who file bankruptcy already have a very low credit score and bankruptcy may make it lower in the short term. Your credit rating during and after you bankruptcy will ultimately be based upon the opinion of the parties who review your credit record; that is your payment history. There is significant information available as to how your scores are computed, but beware there is no quick fix to a low credit score. Bankruptcy is designed to eliminate debt which is one consideration in establishing a score, especially the debt vs. income ratio. A bankruptcy will appear on your credit report for 7 to 10 years depending upon the policies of the particular agency. From my experience, credit score will reach back to where it is in the normal range within two years of a bankruptcy. The score will recover more quickly for those who use credit wisely and more slowly for those who don't.
Just because you file bankruptcy does not mean you will lose your car. Similar to homes, most clients will retain their automobiles and, if they have an auto loan, will continue to make payments (if they so choose) until the car is paid off. To make a determination as to your particular situation, we will review your car loan documents and seek out a current valuation on your automobile.
Implemented with the change in the Bankruptcy Code in 2005, a person filing for bankruptcy now has to go through “Means Testing”. We will request the last six month of your pay stubs or records of income and expenses for self-employed debtors and will calculate your average gross earnings which will then be compared with the statistics for persons of a similar household size in your county of residence. Depending upon how you compare, further testing/calculations which take into account allowable deductions and expenses may be required. Persons who “pass” the Means Test may file under Chapter 7; those who don’t must file under Chapter 13 or not file at all. Of course, not all who pass the test and are eligible to file under Chapter 7 end up filing Chapter 7, as your goals may be better served by a Chapter 13 filing.
After we have reviewed all of your information and run the necessary calculations for the Means Test we will advise you as to which Chapter we believe best suits your needs.
Chapter 7 is primarily designed to discharge general unsecured debt. This includes most debts that are not secured by something (where the creditor cannot repossess something if you don't pay). Examples include credit card debt, medical debt, personal loans and payday loans.
Bankruptcy is not something to be entered into without great consideration. We pride ourselves upon being diligent in the review and preparation of all pleadings, petitions and schedules that are required in the bankruptcy process. In order to prepare these correctly, many records and documents will be requested; many will have to be updated during the process. We know nthat this can be a trying experience, so please be prepared to be patient with it.
It is always advisable to seek out counsel as early as possible and to not wait until the week prior to a garnishment being placed on your paycheck or your home being scheduled for a foreclosure sale. Emergency petitions can be filed very rapidly, but in our experience, they often miss things that would have been revealed had the proper time been taken to thoroughly plan and prepare.
Once we have all of the necessary information we will normally require 7-10 business days to prepare your bankruptcy petition and schedules. Once you have reviewed and approved the documents, filing can usually be accomplished within 1-2 business days. Once filed you will be under the protection of the Federal Bankruptcy Court and the bankruptcy laws.
Even though your bankruptcy is complete and you have received your discharge order you need to remain diligent in protecting yourself from creditors. We are aware of “debt buyers” who actually purchase debt that has been discharged in bankruptcy with intent to collect! Obviously this is in violation of the Bankruptcy Code, but in most instances their unlawful acts go un-punished. Remember that any act or attempt to collect a debt which existed prior to your bankruptcy (excepting debts which you reaffirmed or which relate to a home or vehicle which you have retained) is in violation of the discharge order. There is no time limit on this order, so an attempt to collect a debt at any point in the future is just as much a violation as it would be today. If you receive anything in the mail, any telephone calls, e-mails or other communications, then you should let us know. Save all of the documents including envelopes and get them to me. We are aggressively pursuing these offenders and recovering money damages for egregious violations.
The 1900 Building
1900 S. Harbor City Blvd.
Melbourne, Florida 32901