Should I File Bankruptcy?

If bills and mounting debt have forced you to ask yourself: Should I file bankruptcy? this page is for you. Filing bankruptcy is a personal choice is not the right solution for everyone. We would never try to force you to file bankruptcy and urge you to consider the following before you do:

When filing bankruptcy may be the best option:

Do your debts seem insurmountable? If you cannot see yourself paying off all or most of your unsecured debt (i.e. credit cards, medical bills, judgments, etc.) in the foreseeable future, bankruptcy may be your best option. With exorbitant interest charges, late fees and penalties it is easy to make minimum payments toward your debt and never make a dent in the principle. If you are not paying down the principle you are simply treading water and not making headway.   If this is you bankruptcy may be your only option to get debt free and may save you thousands of dollars in the process.

Are you only able to afford to make minimum payments on debt? Only making minimum payments on credit card or other debt that charges high interest rates will likely never pay off the debt. Consider this, if you owe $5000 on a credit card at 18.9% interest and the card requires a 4% minimum monthly payment each month. In this scenario you are required to pay $200 a month to stay current. If you make no new charges and only pay the minimum amount due it will take you 137 months (or almost 11 ½ years) to pay of the card. During that time you will have paid the bank $8,109.16 on your $5,000 debt. If paying $8,109.16 on a $5,000.00 debt over almost 11 ½ years does make sense to you, contact Matthew C. Bothwell, Esq. for a FREE INITIAL CONSULTATION.

Have you tried and failed to negotiate settlements with your creditors? Negotiating debt settlements with your creditors is a last ditch attempt to avoid bankruptcy. Often times the threat of bankruptcy is your best tool when negotiating debt settlements but often times banks are just not reasonable and you cannot settle the debt. If you and your creditors cannot agree on terms to settle the debt, bankruptcy may be your only option. For more information on negotiating with creditors, check out our Negotiating with Creditors page.

Are you tired of collection calls and harassment? The automatic stay of bankruptcy prevents your creditors from continued attempts to collect debts you owe immediately upon filing. After you receive your bankruptcy discharge your debt is forgiven and your creditors can long longer come after you. If you are tired of collection calls bankruptcy may help.

Is your property exempt? Filing chapter 7 bankruptcy is not without risk. When you file chapter 7 you subject your non-exempts property to seizure by the trustee (your attorney should advise you or what property may be subject to seizure before you file). What property you may or may not lose in bankruptcy depends on what type of bankruptcy you file and what type of property or assets you own. Florida’s property exemptions are generous and include, but are not limited to, a 100% exemption for homestead property, life insurance policies, most pre-tax retirement accounts and pensions. For more information on bankruptcy exemptions please check-out our Florida’s Bankruptcy Exemptions page.

Your property is not at risk when you file for chapter 13 bankruptcy protection.

When filing bankruptcy may not be right for you:

Are your non-exempt assets worth more than your debt? If you have non-exempt assets such as cash, non-homestead property, money market accounts, cars, boats or jewelry that are worth more than what you owe creditors it may not make sense to file for chapter 7 bankruptcy relief. In a chapter 7 bankruptcy the trustee is allowed to liquidate your non-exempt assets and use that money to pay off your creditors. If you have more non-exempt assets than debt, it is probably in your best interest to settle your debt and not file bankruptcy.

If you file chapter 13 bankruptcy the trustee will not be able to liquidate your assets but your payment plan must pay your creditors at least as much as they would have received in a chapter 7. While you would be paying your creditors this amount over time (either 3 or 5 years), if you have more assets than debts it is likely in your best interest to attempt to settle the debt.

Are you looking to buy a home? As a general rule, by the time you have decided to file bankruptcy your credit is wrecked and you want nothing to do with more debt. The good news is that for most people, your credit score will actually improve within in a year of filing bankruptcy. The bad news is that having a recent bankruptcy on your record may temporarily prevent you from obtaining large loans such a mortgage or car loan on favorable terms. While you will likely be able to buy a home or car immediately following your bankruptcy, the bank will probably require a larger down payment than usual and charge a higher interest rate.

Will your debts survive bankruptcy? Not all debts can be discharge or forgiven in bankruptcy.

  • Secured debts such as car loan and mortgages must be kept current if you want to keep the property the lender holds as collateral
  • Student loans will not be discharged absent a showing of extreme hardship.
  • As a general rule income taxes will not be discharged unless 1) the taxes became due at least three years before the filing of the bankruptcy case; 2) the tax return reflecting the tax due, if required, was filed at least two years before the filing of the case, and b) the IRS sought to collect the tax more than 240 days before the bankruptcy filing.
  • Child support, alimony and certain other family obligations ordered by court cannot be discharged.
  • Debt for luxury goods or services incurred within 90 days of filing the bankruptcy case will not be discharged absent a showing of good faith (as a general rule it is best to not incur debt within 90 days of filing bankruptcy).
  • Debts owed on cash advances obtained within 70 days of filing the bankruptcy will survive the bankruptcy discharge.
  • Fines or penalties owed to a governmental unit such as criminal fines and penalties will not be discharged.
  • Debts owed as a result of your causing injury or death to another while intoxicated will survive your bankruptcy.

If your debt is listed above it is important that you speak with a bankruptcy attorney before filing.

Filing bankruptcy is personal and unique to each individual. Before you file it is important that you fully understand the bankruptcy process and the ramification of filing bankruptcy. It is also important to determine which type of bankruptcy is best for you (chapter 7 bankruptcy or chapter 13 bankruptcy). For more information about the bankruptcy process please check-our our Bankruptcy Process page. And for more information about Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, please follow these links.

For answers to your bankruptcy questions or for a FREE INITIAL CONSULTATION please contact Jacksonville’s debt relief lawyer, Matthew C. Bothwell, Esq. We are here to help.