Many people are facing difficult financial times in this rough economy.
The residents of the state of Florida are no different. When real
estate was booming and loans were easy to come by, the people who live
here bought as much as they could.
Now, many are stuck in a situation where they are unable to pay their
bills due to loss of a job or are not able to see their homes because
the value has decreased so significantly. When hard times come, many
people have to turn to bankruptcy in order to survive financially. The
good news for Florida residents is that it is one of the most liberal
states when it comes to bankruptcy laws.
Types of Bankruptcy
There different types of personal bankruptcy, Chapter 7 and Chapter 13.
There is also Chapter 11 and that is specifically for business owners.
Chapter 7 bankruptcy allows for all debt to be forgiven, as long as it
is unsecured debt such as credit cards and other personal debt.
Chapter 13 allows the debtor to repay some of your unsecured debt and
also pay on your secured debt. This is what is commonly used when a
person wants to keep their home but has fallen behind on their
payments. Chapter 13 will let you keep your home and avoid foreclosure
while you attempt to make up payments.
With Chapter 7, all of your unsecured debt is released. This includes
credit cards, medical bills and other personal debts. Chapter 7 is the
most common form of bankruptcy that is filed. All of the assets of the
debtor are taken by the court, except their home.
In Florida, homes are exempt from being taken in a bankruptcy. You may
also keep all your retirement income assets, cars and some other
assets. You may also be able to keep one or two credit cards. You just
have to go into an understanding with your credit card company that you
realize you have to continue making payments.
With Chapter 13 allows you to save your home from being foreclosed on
and allows most of your unsecured debt to be forgiven. Your secured
debt will not be forgiven.
The process for filing bankruptcy can be lengthy and take between four
to six months from start to finish. Paperwork must be filed with the
courts and a hearing takes place before anything can be approved.
Effect on Credit
The bankruptcy will stay on your credit report for ten years, but you
may be able to establish credit in two years from the time of your
bankruptcy. Unfortunately, you credit will be damaged for a few years
directly proceeding your bankruptcy.
While you may be able to keep a credit card, it will be very difficult
to open a new one or get a new loan for a car or home. You will have to
remain diligent and make payments on time during your bankruptcy to
ensure your credit improves over time.
What Can Prevent You from Filing
You may not be able to file for Chapter 13 bankruptcy if the courts do
not find your plan to be workable. If you do not make enough money for
the plan to work, they may deny your request and make you file for
Chapter 7. Filing bankruptcy is a right under the Constitution so there
is nothing truly preventing you from filing.