Bankruptcy refers to a legal proceeding in which a debtor declares their inability to pay back their debt to creditors. The primary objective behind declaring bankruptcy is for the debtor to have a fresh start while giving the creditors a way to get some or all of their owed payment.
Chapter 7 is the most common bankruptcy, and may also be referred to as liquidation. When you file a chapter 7 bankruptcy, the court appoints a trustee to sell your non-exempt assets to pay back creditors. Below we will discuss the merits of filing a chapter 7 bankruptcy.
An Automatic Stay Against All Creditors
Once you file for personal bankruptcy in Florida, the court issues an automatic stay against all debt collection activities. While this does not cancel your debt, it suspends any debt collection activities until the bankruptcy case is complete or until the court lifts the stay.
An automatic stay protects you against:
- Harassing phone calls and letters from lenders
- Debtors lawsuits on the debt.
- Property repossession.
- Home mortgage foreclosures, and
- Wage garnishments.
If your lender tries to collect the debt from you during the stay, your bankruptcy attorney can file a contempt of court claim against them. They may be required to pay a fine or damages for these violations.
You Can Remove Your Debt And Still Keep Your Assets.
The law exempts certain assets (such as the primary residence, retirement funds, personal vehicle, and trade tools) from liquidation for individuals. This protects you from having all your livelihood taken while allowing you to pay back the creditors from non-essential possessions.
Exemption laws involved in filing for bankruptcy chapter 7 will not forfeit any of your essential assets.
The Legal Process Is Fast.
The whole filing process for Chapter 7 bankruptcy can take as little as three to five months. That means you won’t have to agonize over your debt situation during an extended period of time.
Note that the 3-5 months process covers all the proceedings stages, including your initial consultations and meetings with your bankruptcy attorney, credit counselors, debtor education courses, 341 meeting with the creditors, trustee, attorney, and discharge process from the court.
It Does Not Involve Your Future Income.
Upon filing for bankruptcy, the court considers and evaluates your income for a 6-month period before filing the case. Anything made after that is not necessary in the bankruptcy case.
Unlike Chapter 13 that will require you to make monthly payments until you complete your debts, Chapter 7 does not require monthly payments or submitting monthly income statements.
You Get A Fresh Financial Start.
Upon completing the bankruptcy case, all your debts will be discharged and erased to start over with new accounts. At this point you begin the recovery process. While the bankruptcy will remain on the credit report for 8-10 years, you can rebuild your credit within that period.
Your credit score will increase slowly, and with time, you will qualify for loans again. It allows you to prove that you can be responsible with your finances.
The Bottom Line
Filing for bankruptcy is a way to get your credit back on track. Avoiding bankruptcy only drags and prolongs your debt, deteriorating your credit even more. Please know that you can end the stress of wallowing in debt.