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Miami Bankruptcy Law Blog

Drawbacks of Chapter 7 bankruptcy

Florida residents who are trapped under a pile of debt may be looking at different bankruptcy options in order to rid themselves of a financial burden. Though many options are available, today we will be taking a look at Chapter 7 bankruptcy.

The United States Courts covers bankruptcy basics, in which matters like Chapter 7 bankruptcy are discussed. It is noted that this type of bankruptcy is particularly valuable to people facing creditor harassment, as well as those who are unable to pay back debts due to a lack of income. It allows for the person's assets to be liquidated in exchange of forgiving most sources of debt. Because no repayment plans are involved, debt is cleared much faster.

What is credit counseling?

If you struggle to pay your bills in Florida due to large amounts of debt and would prefer to avoid bankruptcy, you may have received recommendations to seek help in the form of credit counseling. Credit counseling may help, but only to a certain point. 

According to the Consumer Finance Protection Bureau, a credit counselor is usually a part of a non-profit organization. Fees for services are usually minimal, and the organization may waive them depending on your financial situation.

Medical expenses can lead to bankruptcy

Many people in the United States suffer from overwhelming medical expenses, stemming from an unexpected injury, medical diagnosis or other ailment. According to a CNBC report, medical debt is the number one cause of bankruptcy in the United States. Approximately 2 million people every year suffer from the effects of medical expenses, and another 643,000 people file for bankruptcy as a result of medical debt.

Medical conditions and injuries can affect people in a number of ways. People who are sick may be forced to miss work until they can recover from their injuries. In some cases, people may go unpaid while they are out of work due to illness. Furthermore, people may be charged different medical expenses depending on where they live and which medical institute they go to. A study conducted by the National Institutes of Health found that emergency room costs across the United States vary significantly depending on where they are located. For example, ER charges for a sprain ranged from $20 to $20,000 depending on where the patient was treated.

What are the pros and cons of debt settlement?

If you are struggling with debt from overdue medical expenses, credit card debt, mortgages and other bills, you are not alone. The average American household carries more than $6,700 in debt that revolves from month to month. With high interest rates and minimum payments due, it is easy to get left behind when it comes to paying off your balances. Debt settlement is designed to help people pay off their debt and emerge free and clear of financial stressors.

Debt settlement allows you to make a lump sum payment, usually a significant amount less than what is actually owed, to clear you of your debt. In many cases, the settlement goes through a third-party company that negotiates a settlement with your creditors. There are pros and cons to debt relief, however, as some companies may act as scams and affect your credit.

How to recognize and avoid foreclosure scams

When you have concerns about potentially losing your Florida home, you may be experiencing feelings of desperation, and those feelings of desperation can lead you to believe things you perhaps otherwise would not. At Kingcade Garcia McMaken, we recognize that many people become more susceptible to foreclosure scams when they fear losing their homes, and we have helped many clients avoid falling victim to such scams while otherwise helping them regain control over their finances.

According to, foreclosure scams typically involve scam artists getting in touch with you and offering to help you either keep or sell your home while avoiding foreclosure. Typically, the scammer will require a fee from you for this service, and they may collect that fee and then do nothing to help your situation.

What is a meeting of creditors?

When you file for Chapter 7 bankruptcy, there are several items that must be addressed before your case is completed and your debt is dismissed. Once you are deemed eligible to file for Chapter 7, you must take the mandatory credit counseling course and file your bankruptcy documents with the court. The trustee appointed over your case will then schedule a meeting of creditors, also referred to as a 341 hearing, sometime between 21 and 40 days after the bankruptcy petition is filed. It is important that you understand what goes on during the meeting so that you can be prepared to answer any questions that may come your way.

Not only will the trustee appointed to the case be present at the meeting of creditors, but any creditors involved in the case are invited to attend as well. Creditors are allowed to ask questions regarding your bankruptcy, debt and property. Since you are under oath, it is critical that you answer all questions honestly.

What is exempt from liquidation in a bankruptcy?

You may have been told that you can lose some property if you file for a Chapter 7 bankruptcy. This information may have dissuaded you from seeking relief. However, it is important for you and other Florida residents to understand exempt and non-exempt bankruptcy assets, so you can make an informed decision.

According to FindLaw, non-exempt property may be sold by a bankruptcy trustee to repay creditors before you receive a discharge of the rest of your eligible debt. What exactly is non-exempt property, you may wonder? This includes assets the court does not consider necessary for modern life and your continued employment. Non-exempt assets can include a second home or recreational vehicles, collections and jewelry over a certain value, investments and stocks and bonds.

Qualifying for a mortgage following bankruptcy

A Chapter 7 bankruptcy may be the best option that Miami residents who are struggling with debt have at re-establishing themselves financially. Through the discharge of certain debts, filers are able to get out from under their many liabilities and be able to use utilize more of their personal resources to getting back on top of their money management. It is for this very reason why Chapter 7 remains the most popular form of personal bankruptcy (the American Bankruptcy Institute reports that through the second quarter of 2018, over 63 percent of all non-business bankruptcy filings fell under this chapter). 

Yet seeking bankruptcy protection is not a decision that should be made lightly, as doing so will inevitably impact one's credit rating. Many of those who are contemplating filing for bankruptcy will often ask how long it will take to rebuild their credit to the point of being able to borrow money again for large purchases (such as a home). Technically, one can qualify for a mortgage soon after their bankruptcy case is discharged if they have a large down payment. However, in such a situation, they would likely be saddled with an unfavorable interest rate, and if they indeed did have access to such funds so quickly, the chances of ever qualifying for a Chapter 7 bankruptcy in the first place would have likely been remote. 

Florida fourth in US for foreclosure troubles

An overall healthy national and global economy does not always guarantee protection from serious financial challenges for individuals. Many people in Florida know this through their own first-hand experiences. The problems can extend beyond credit card debt to mortgage delinquencies that put homeowners in jeopardy of losing their homes.

New data has been released by ATTOM Data Solutions that indicates Florida has the fourth-highest number of foreclosure actions among all states in the country. As reported by the Herald-Tribune, one out of every 487 homes has been scheduled for repossession by a lender, an auction or been served a default notice. The rate of these actions grew by 24% in 2018. Initiation of foreclosure actions in Florida spiked by 65%.

ABI calls for bankruptcy reform

People in Florida who cringe at the thought of opening their email or physical mailboxes for fear of seeing yet more demands for payment by creditors are not alone. The stress that excessive debt can put on consumers may feel overwhelming at times. Instead of being able to consider filing for bankruptcy as a way of getting out from under a mounting mound of debt, some people are left swirling with no real options. 

According to a new report recently released by ProPublica, some believe that the current bankruptcy code may well prevent access to bankruptcy relief simply because a consumer cannot afford to pay for the bankruptcy. It is ironic indeed to think that a person in need of debt relief is precluded from getting that relief because of an inability to pay for it. 

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