Now that your stimulus check is gone - what do you do with the bills you cannot pay?

There are many solutions depending on the type of debt that it is.

Options include: Working with a legitmate non-profit to manage your debt, getting assistance in negotigating debt settlement, seeking a modification of your mortgage loan, filing a Ch. 13 bankruptcy to reset payments, or if you are below income guidelines, filing a Ch.7 and discharging the debt to start over.


There is a stigma about filing bankruptcy, but the law was made to allow people to either make payments through a Ch. 11 or Ch.13, or if they are truly unable to pay, to discharge that debt.


There are Advantages and Disadvantages to Bankruptcy

Declaring bankruptcy gives individuals or businesses that are unable to pay their debts a way to solve their financial difficulties. It can help them start rebuilding their credit and lives in a more positive and financially stable way. It can stop lawsuits, garnishments, levies and allow a person to work with creditors or the Court to get a handle on the circumstances.

In most cases, filing for bankruptcy seems like a scary and overwhelming task. However, it is often the right choice.

The article below will discuss the pros and cons of bankruptcy, and whether it is the right option for you.


What are the Advantages to Filing for Bankruptcy?

Bankruptcy is designed to provide relief for those that are unable to pay their creditors. It does not alway mean that the debtor will not pay something to creditors and it does not mean that the debtor has to give everything up.

Listed below are some of the advantages that bankruptcy can provide:

  • Filing for bankruptcy will trigger an “automatic stay” — the automatic stay stops creditors from taking action to collect their debts, and stops creditors from repossessing property such as cars, and personal property. It also prevents creditors from calling you, suing you, or sending you letters. This stops garnishments, levies and allows for a resolution.


  • Filing for bankruptcy puts a stop to many evictions, foreclosures, wage garnishments and utility shutoffs. This will allow a debtor to schedule payents, discuss settlement options and plan for a resolution.


  • Depending on your income or your assets, the type of debt it is, you may be able to discharge your obligation to repay some of your dischargeable debts. This leaves what money you do have for essential debts like rent, mortgage payments, car payments, food, electricity.


  • Your credit may improve. After filing for bankruptcy, your debt to income ratio will improve which is a factor in determining your credit worthiness.


  • While a bankruptcy filing will remain on your record for 7-10 years, because debts can be discharged in bankruptcy, many debtors begin improving their credit rating after filing for bankruptcy.


  • Most people that file for bankruptcy find relief knowing that they have a fresh start. While this may not seem like a huge advantage, filing for bankruptcy allows you to start fresh and be mentally freeing.


  • If you don’t have credit cards, you can learn to live within your income and prevent future financial catastrophes.


  • Debtors that file for bankruptcy will have access to financial counseling which will give you access to the tools to better balance your debt and manage your life.


  • In a claim for bankruptcy you will be able to hold on to certain assets and manage your payments in smaller sums.


What are the Disadvantages of Filing for Bankruptcy?

Although bankruptcy has many advantages as stated in the section above, it also has repercussions that can negatively affect your lifestyle and your long term financial situation. Listed below are some of the most important and common disadvantages:

  • If you are unable to exempt all of your personal property or real estate under the bankruptcy exemptions, some of your property may be seized by the bankruptcy court and sold to pay your creditors. There are many exemptions, such as for homestead property, two cars, social security income, pension income, but there are limits. You can choose what debts you also include and continue to keep a asset that has a debt on it and continue to pay on it.


  • Your bankruptcy will be noted on your credit report for up to 7-10 years.


  • Many credit card companies will automatically cancel your credit cards when you file for bankruptcy and this may lead to having difficulty getting new credit cards or lines of credit.


  • Because bankruptcy is a public filing, a recent bankruptcy may hurt your ability to obtain a mortgage or loan for several years as it will be seen as a red flag to banks.


  • Your tax refunds from federal, state or local governments may be in jeopardy or denied based on your bankruptcy.


  • If you are a member of a corporation, you may be precluded from being named a director for limited liability companies.


  • After your bankruptcy, many debts, such as student loans, different types of tax debts, liens, support orders (including child support and alimony), federal and local taxes, or fines may be non-dischargeable.


  • When filing for Chapter 7 bankruptcy, you will need to wait if you want to file again for at least 8 years. Therefore, if more financial difficulties pile up, you will be stopped from filing for bankruptcy again for some time.


  • It can negatively impact a search for employment, because filing for bankruptcy is a public record and can be seen by potential employers.


  • If you have any joint accounts, creditors can demand payment from the non-bankrupt debtor or any cosigners on those accounts.


However, the benefits of bankruptcy often outweigh the disadvantages.


The COST of Bankruptcy?


This depends on which attorney you use, your income, your assets and which filing you seek. The average cost of a Ch. 7 bankruptcy is $1750.00 to $2000.00 to the attorney, a fling fee to the Clerk of the Court of $338.00 (Middle District of Florida) and fees for taking credit counseling and financial management. Many attorney's allow payment over time of these costs.


A Ch. 13 Bankruptcy is much more expensive because it is based on a paymment plan through the Court and Trustee, with the Attorney continuing to represent the debtor, for three or five years depending on the income of the debtor and the amount of the debt. The average cost of a Ch. 13 bankrupcy is $4200.00, along with a filing fee to the Clerk of the Court of $313 (Middle District of Florida) again fees to tkae credit counseling and financial management courses. The fee to the attorney can be paid through the plan.


The best advice is if you are struggling, being sued by creditors, facing foreclosure, facing eviction, having your wages garnished, having assets being threated to be repossessed, contact an attorney who does bankruptcy and find out what your options are. You don't have to face it alone.


You can call Bates-Buchanan & Savitksy Law Group P.A. at (941) 799-3015 for a consultation today.

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