Deciding to declare bankruptcy is never easy. There is a strong connotation associated with the word itself. Still, it may provide some solace to remember that even once-wealthy celebrities have filed for bankruptcy over the years. Just ask Mike Tyson. If used properly, declaring bankruptcy can offer a clean slate. This blog will provide an overview of when you should consider declaring bankruptcy and which steps to follow if you decide to do so.
What to Consider
The Chapter 7 bankruptcy statute is meant to provide an avenue for individuals to start over financially. If, for whatever reason, debtors are unable to repay their debts, then this provision establishes a route to debt forgiveness. Hey, that is better than medieval England’s debtors’ prison system, right? The first relevant factor when considering whether to file is whether or not you are unable to repay your debts, or whether it just feels that way.
This may seem like a simple distinction, but it is highly relevant to a court’s decision-making process. If you are able to renegotiate the rates or schedules of your debts, then filing for bankruptcy may not be necessary or even possible. In fact, the state of Florida requires each individual seeking to claim bankruptcy to complete a means test. This “test” (it is really just a form that you fill out) asks you to list all of your expenses and sources of income. If you can show that you are in fact unable to meet all of your financial demands, then your chances of successfully filing for bankruptcy are pretty strong.
Also, it is important to note that while many debts may be discharged under Chapter 7, such as credit card payments, others may not be discharged, such as alimony or child support commitments.
What Happens to Assets
Under Chapter 7, the idea is that a debtor is unable to repay his or her debts. Therefore, that debt will be forgiven, meaning that the debtor will no longer be required to fulfill those obligations. Obviously, in this case, the creditor is the loser. In order to compensate the creditor in Chapter 7 cases, courts will often seize certain assets and award them to any creditors. Some assets may be exempt from such repossession in certain states, such as:
- Reasonably necessary clothing
- Motor vehicles, up to a certain dollar amount
- Personal injury damages payments
Most other assets, such as musical instruments, secondary motor vehicles, investments, and family heirlooms are usually up for grabs. The repossession of assets is a way to not only reward creditors for lost revenue, but also to encourage debtors to consider all of their options carefully before deciding to file for bankruptcy.
What Steps to Follow
If you have done the math, and you believe that you are indeed unable to meet your financial commitments, and you understand that you may lose certain assets, then the next step would be to contact an experienced, expert legal team, like the one at Adam Law Group. Choosing to work with a team that can successfully navigate you through the Florida bankruptcy courts is absolutely essential to your future financial health.