Christian D. Posada, P.A. | Bankruptcy
What Is Bankruptcy? Man going through Bankruptcy

Bankruptcy is a legal status of a person or an organization, when one cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor that is insolvent.

The term bankruptcy is not the same as insolvency.

Bankruptcy Types
Bankruptcy Types

Chapter 7

Basic liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available. As much as 65% of all U.S. consumer bankruptcy filings are Chapter 7 cases.

Chapter 13

Rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy.

Understand the Relevant Terms of Bankruptcy

Stay Informed About Bankruptcy

Filing Bankruptcy will ruin my credit.

Just the opposite. After the bankruptcy, you are left with minimal, if any, debt and, as a result, you are viewed by your prospective creditors as a better credit risk, because you have shown them that you have acted in a fiscally responsible manner to protect your household, and, having eliminated your prior obligations to past creditors, are now in a better position to afford payments on new debt.

Filing Bankruptcy will prevent me from ever buying a new home.

Wrong. Bankruptcy gives you a fresh start, thereby giving you the ability to save for a down payment on a new home. In addition, bankruptcy will enable you to show income that is not now going to past creditors, giving you a better opportunity to qualify for a mortgage. Under most circumstances, you will be in a position, after having filed bankruptcy, to apply for a mortgage in approximately two (2) years after your bankruptcy discharge. To qualify for a mortgage, your debt must not exceed a certain percentage of your income. High debt to income ratios will forever bar you from qualifying for a mortgage, whether or not you have a bankruptcy in your credit history. We recommend that you consult a mortgage lender of your choice to verify the importance of the debt to income ratio, as well as other pertinent factors relevant to qualifying for a mortgage.

Filing for Bankruptcy is a simple process – anyone can do it, including a petition preparer.

There is no such thing as a “simple” bankruptcy. Even what may be considered a relatively “simple” bankruptcy, by a qualified attorney, can quickly become complex and problematic to the Debtor. Bankruptcy petition preparers cannot give any legal advice. They can only file whatever bankruptcy papers you ask them to file, regardless of whether it is in your best interest and comports with the law, or not. Filing a bankruptcy petition without proper legal advice can lead to more serious complications than the ones attempting to be eliminated by the bankruptcy filing in the first place.

I am unemployed and have no assets. Therefore, I do not need to file bankruptcy because my debts are uncollectable.

In rare cases, this statement is absolutely true. This is an issue that only a qualified bankruptcy attorney can properly answer. In most instances, however, filing while you are unemployed and have no assets may be exactly the proper time to proceed with a bankruptcy, in that when you do go back to work, your creditors will not be in a position to garnish your wages or attack any future assets you may acquire. Again, this is a question that is best answered by a bankruptcy attorney.

My bankruptcy filing will become public knowledge and everyone will know.

This is a legitimate concern that everyone considering bankruptcy is questioning, because bankruptcy is a public legal proceeding. Generally, the only people who know that you have filed are your creditors, as each of them must be legally notified that you have done so. Nevertheless, unless you inform an outside party that you have filed bankruptcy, it should not be a concern, unless you are a highly prominent individual or a major corporate entity. The sheer volume of bankruptcy filings is so overwhelming now, that few publications have any interest in individual filings, other than those involving prominent persons and/or major corporations.

I’ll never get credit again.

False. The purpose of the bankruptcy filing is not only to help you eliminate your debt burden, but to also give you a fresh start. A fresh start includes the ability to re-establish your credit. Your free consultation with our office provides you with the information that aids in debunking this myth.

All debts can be discharged in a bankruptcy filing.

False. Certain debt is not eligible for discharge through a bankruptcy petition, including IRS obligations, child support and alimony obligations, student loans, and certain fines. This myth is best dealt with at the time of your free consultation with our office.

Once I file for bankruptcy, I'll never be eligible to file for bankruptcy relief again.

False. There are timelines governing eligibility for additional filings, however, you are not precluded from filing again. The timelines under the current law for a Chapter 7 petition are: 8 years after discharge from the first filing; you are also allowed to file a Chapter 13 petition again, depending upon your financial situation.

Most people are under the misconception that bankruptcy is the end, rather than the beginning, to their financial future. Fortunately, the reality of filing for bankruptcy is the most positive step one can make toward taking control of a debilitating, negative financial situation.

Bankruptcy allows you to restore your credit, become more aware of your financial priorities in terms of spending how much money on what purchases, and puts you in the driver’s seat in terms of outcomes, is the most effective, timely way to restore your financial future.

While it is true that your credit report will reflect the bankruptcy filing for ten (10) years, effective methods, when used responsibly, will aid the individual in minimizing the effect of the bankruptcy on their credit report. A free consultation with our office will provide you with a guideline to those methods and give you the tools to utilize them effectively to your benefit.

Future creditors are much more likely to give you credit, after your bankruptcy, because the bankruptcy has eliminated your past debt, leaving you with the opportunity to make payments on your obligations to them. It also indicates to the future creditors that you have taken control of your financial situation, which, in their eyes, shows that you possess fiscal responsibility in that you have protected your household from financial collapse and are more capable of managing your future debt as a result of that prudence.

The fresh start provided by a bankruptcy, relives you of the stress caused by burdensome debt. You may even become more effective in handling your personal finances and determining your budget, all of which will help you to rehabilitate your credit.

If you take the proper initial steps, after your fresh start, you will be able to go forward in a positive manner, learning from your experience, adjusting your spending habits, and maximize your new lines of credit, once they have been re-established.

Consulting with an experienced bankruptcy attorney, who can inform you of your options, both before and after bankruptcy, is the first step in the right direction. Experience has shown us that many of our clients, after bankruptcy, go on to re-establishing their credit and are so much happier with their day-to-day lives.

We will be pleased to meet with you to discuss the pros and cons of the bankruptcy process, allowing you to make an informed decision regarding this serious step. Our office is staffed with skilled, compassionate professionals and is, therefore, very capable of providing you with individualized advice and representation through all phases of the bankruptcy process. Simultaneously, we will provide you with the information necessary to allow you to responsibly, efficiently and effectively re-establish credit after filing for bankruptcy.