Winter Garden-Clermont-Orlando Bankruptcy Law Center

The Emotional Effects of Bankruptcy

No matter what circumstances ultimately led to the need to file bankruptcy, the emotional impact on the debtor will be enormous. Confronting the emotional issues surrounding bankruptcy and reaching an understanding and acceptance of the situation will be essential to rebuilding a successful financial life.

Alternatives to Filing Bankruptcy

Debtors who have faced obstacles to paying off their debts when due have no doubt received more than their fair share of demanding letters and phone calls, and the thought of filing bankruptcy and getting rid of their debts, and thus the constant demands, can be quite appealing. Before making a decision to pursue that route, which can have long-term effects on credit rating and the ability to make large purchases, debtors may wish to consider other, less drastic alternatives. Talking through these options with an experienced bankruptcy attorney at in can help make sense out of the myriad complex and confusing choices that must be made at an already stressful time.

Informal Methods of Debt Resolution

If the debtor’s financial problems are only temporary, he or she may want to ask creditors to accept lower payments or to schedule payments over a longer period of time. Creditors may be receptive to these ideas if the debtor has been a prompt payer in the past, or if the specter of bankruptcy is raised, since creditors know that once a bankruptcy proceeding is initiated they will probably collect only a portion of what is owed. In addition, creditors may wish to avoid the difficulties of a court proceeding to collect on the debt, which can be time-consuming and expensive.

Consumer credit counselors can also help creditors work out a repayment plan. Some so-called “credit counselors,” however, prey on overwhelmed consumers, promising “a clean slate,” often for a flat, up-front fee. They may promise to contact creditors and convince them to accept lower payments or to charge lower fees and interest rates. In many cases, unfortunately, the only ones who end up in better financial shape as a result of these “efforts” (or the lack thereof) are the counseling organizations themselves, while the consumers are left with even fewer resources as a result of high fees and more delinquent debts.

Conclusion

If a debtor’s financial troubles are long term or if his or her creditors will not informally agree to an alternative payment plan, then bankruptcy may be the best way for the debtor to get out from under an insurmountable debt load. Although it is not without its adverse consequences, bankruptcy can be the right option to enable debtors to make a fresh start. When all else fails and bankruptcy seems inevitable - Contact Mark today and find out whether bankruptcy is the right choice for you.

Bankruptcy Process

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2005 Bankruptcy Act Credit Counseling

The 2005 Bankruptcy Act requires all individual debtors who file bankruptcy on or after October 17, 2005, to undergo credit counseling within six months before filing for bankruptcy relief and to complete a financial management instructional course after filing bankruptcy.

2005 Bankruptcy Act Means Test

Under the 2005 Bankruptcy Act you income and expenses will be analyzed to determine if you qualify to file a Chapter 7 or if you must file Chapter 13. To apply the means test, the courts will look at the your average income for the 6 months prior to filing and compare it to the median income for that state. If the income is below the median, then you may choose Chapter 7. If your income exceeds the median, the remaining parts of the means test will be applied to determine if you can file Chapter 7 or if you must file Chapter 13.

Your will likely still be able to file a Chapter 7 bankruptcy if you are unable to pay at least $6,000 over the next five years ($100 per month) to your unsecured creditors after your expenses. However, if you can pay at least $10,000 over five years ($166.67 per month or more) your Chapter 7 will likely be denied.

If you could afford more than $6,000 but less than $10,000 over five years, then a mathematical calculation determines whether your Chapter 7 will likely be successful or not. If you could afford to pay 25% or more of your unsecured debt, then a Chapter 7 will likely be denied. If you can't afford to pay 25% of your unsecured debt, your Chapter 7 filing will likely be successful. Examples of unsecured debts would include medical and credit card bills. Note that you can still opt for Chapter 13 even if you qualify to file under Chapter 7.

Gathering Paperwork

To begin the bankruptcy process you must itemize your current income sources; major financial transactions for the last two years; monthly living expenses; debts (secured and unsecured); and property (all assets and possessions, not just real estate). You should also collect your tax returns for the last three years, deeds to any real estate you own, your car(s) titles or registrations and the documents for any loans you may have on any cars, boats or other types of vehicles or recreational vehicles. Contact My Office Today for a free questionnaire to help you begin to put this information together.

Filing Bankruptcy

Once you have gathered this information, with the help of my office, we will begin the process to determine which property is exempt from seizure based on the Florida exemptions. To actually file, we will file a two-page petition and several other forms at Federal Bankruptcy Court for the county in which you reside. These forms, collectively are referred to as the petition and schedules and describe your current financial status, recent financial transactions (typically within the last two years) and what assets you own. If the United States Trustee, your creditors or the judge believe or find out that you have not been entirely honest in your bankruptcy filing, it will jeopardize the outcome of your petition and may have the effect of preventing you from filing for bankruptcy protection in the future.

Beware of Scams

Although reputable credit-counseling agencies that actually provide valuable services to financially overwhelmed consumers do exist, vulnerable debtors often fall prey to less scrupulous services. Tips that can help consumers avoid the scams include:

Promises that sound too good to be true usually are too good to be true; any suggestion that you can “get out of debt easily” should be avoided
You should only deal with reputable agencies by checking with the State of Florida consumer agencies and the local Better Business Bureau to make sure there have been no complaints against the agency you are about to ask to help you
Make sure the organization provides counseling and education, as well as debt consolidation and payment services, to help you achieve financial stability and remain debt-free
Carefully read through any written agreement that any organization offers to make sure it describes in detail the services to be provided; the payment terms for these services, including their total cost; how long it will take to achieve the desired results; any guarantees offered; and the organization’s business name and address
DO NOT pay up-front fees to credit counseling agencies. The truly reputable agencies do not charge big up-front fees, but may take a small monthly fee for a debt repayment service; the initial consultation should always be free
Beware of any high fees or required contributions, like high monthly service charges, that may add to the overall debt load and defeat efforts to pay off bills
Confirm payments with creditors. Some debt repayment services require the consumer to periodically send it a lump-sum check that it divides among the creditors. Debtors who enter into these types of arrangements should verify with their creditors that the payments are actually being made.

If you think Bankruptcy may be your answer, contact our office today.