Sep18

Understanding the Benefits of Seeking Bankruptcy

Paperwork for Petition for Bankruptcy

It’s fair to say that the role of bankruptcy is not well understood by the public. Bankruptcy laws help individuals who cannot pay their debts by either liquidating assets to pay your creditors or setting up a repayment plan.

Yet, many people attach some social stigma to declaring bankruptcy and they are reluctant to take advantage of a powerful legal tool to make their golden years less financially stressful. Instead, these consumers struggle under a growing burden of debt that drains their resources and limits their financial flexibility and ability to plan for the future.

As a recent New York Times article noted, bankruptcy protection can provide financial relief to seniors and help them protect their retirement assets and have something to leave to their children and grandchildren. We have seen the look of surprise when explaining this fact to clients.

Did you know that your retirement income, Social Security benefits, 401(k)s, and individual retirement accounts up to a certain value are usually shielded during bankruptcy proceedings? It helps to have a knowledgeable bankruptcy attorney guide you through the complicated process, but filing for bankruptcy doesn’t mean losing your pension or Social Security benefits.

Florida’s homestead exemption protects your equity in your primary residence as well, if you qualify. You must be a Florida resident and meet other eligibility criteria to qualify for a homestead exemption. If you do, it can be an effective tool.

Hardworking families with mortgages and car payments may find themselves unable to pay their bills because they lose their job, go through a painful divorce or have a major health crisis.Many people are still struggling to recover from the recession. According to a recent news report in the Daytona Beach News-Journal, Volusia County had the nation’s 22nd highest ratio of homes in a stage of foreclosure, while Flagler had the 46th highest ratio. Homes either had a mortgage loan default warning letter issue, or were in foreclosure with a sale scheduled.

A bankruptcy filing will stop collection attempts and bring you relief from harassing phone calls and letters from debt collectors, garnishment of your wages and threats from creditors. Federal courts oversee bankruptcy proceedings, and there are different types of bankruptcy. Individuals may file a petition using either Chapter 7 or Chapter 11 of the U.S. bankruptcy code, depending on their situation.

Chapter 7 bankruptcy is the most commonly used filing procedure, representing 70 percent of filings, according to the Federal Reserve Bank. It provides for the liquidation of non-protected assets to pay creditors and offers a fresh start. At the end of the day, individuals who file Chapter 7 petitions still are responsible for repaying certain debts including federal taxes and student loans.The bankruptcy code allows for an individual to keep certain exempt property while discharging debts.

People with higher incomes may file under Chapter 13, creating a plan to repay creditors some or all of the debt owed over a period of years.

Everyone’s situation is different. Bankruptcy protection isn’t right for all financial situations. But if you are drowning in debt that you cannot repay, it is worthwhile to have a bankruptcy attorney at Chiumento Selis Dwyer review your situation and explain your legal options to make a fresh start.