By Craig I. Kelley, Esq.
Your mortgage payment is adjusting to a payment that you cannot afford. You incurred a large amount of debt to start a business or pay bills. You had unexpected expenses to care for a loved one. You lost your job. Whatever the reason, you now have a large amount of debt. Creditors call your house. You can’t make the payments. You wonder if you will ever be debt-free again. Should you file for bankruptcy? Are there other options?
Bankruptcy may provide you with a financial fresh start by eliminating all or a portion of your existing debt. A person considering filing for bankruptcy should weigh all availableoptions through individual research and consultation with an experienced bankruptcy professional.
Whether you should file for bankruptcy and which type of bankruptcy you should file depends upon your particular circumstances. An experienced bankruptcy professional can review your particular circumstances and discuss with you whether bankruptcy is the right choice for you and, if so, which type of bankruptcy you should file. There are actually several types of bankruptcy: Chapter 7, 11, 12 and 13. (“Chapter” refers to the chapter of the Bankruptcy Code that contains the bankruptcy law.)
In a Chapter 7 bankruptcy, sometimes called “liquidation” bankruptcy, you will receive a discharge of your debts, and the bankruptcy trustee can only liquidate (sell) your non-exempt assets and distribute the proceeds to your creditors. Whether an asset is exempt from liquidation by the trustee is dependent upon the state and/or federal exemption laws. For example, Florida has liberal bankruptcy exemptions, including a liberal homestead exemption, but only Florida residents who meet specificresidency requirements are eligible for Florida exemptions.
On October 17, 2005, significant changes to the bankruptcy laws went into effect making it more difficult for some people to file for bankruptcy under Chapter 7. If you do not qualify for Chapter 7 under the new laws, you may qualify for a Chapter 13 bankruptcy.
A Chapter 13 bankruptcy is a reorganization of your debts through a repayment plan. Qualification for Chapter 13 is not automatic. Since a Chapter 13 requires you to use your income to repay some or all of your debt, you must have adequate and regular income to meet your payment obligations.
You may also choose to file a Chapter 13 bankruptcy if you have non-exempt assets that would otherwise be liquidated in a Chapter 7 or if you need to cure a default on yourhome mortgage or repay the IRS on a monthly basis over time.
A Chapter 11 bankruptcy is primarily used for businesses that are restructuring while continuing to operate. An individual may file for Chapter 11 bankruptcy under some circumstances, but Chapter 11 proceedings are complex, and individual debtors normally use Chapter 7 or Chapter 13.
The decision to file for bankruptcy is complex. An experienced bankruptcy attorney can help you navigate through the decision-making process to determine whether filing bankruptcy is a good option for you.
—Craig I. Kelley, Esquire of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach Community College and lectures nationally on the subject. His office is located in West Palm Beach and he can be reached at 561-491-1200 or firstname.lastname@example.org. Log on to http://www.kelleylawoffice.com for more information.
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