Fort Lauderdale Bankruptcy Lawyer Blog

Most people that come for a bankruptcy consultation had excellent credit up until a job loss, or an illness, injury or a divorce. Unplanned life events force them to dip into their savings account or they start selling off assets to continue paying that minimum payment and "maintain" their credit scores. They are usually depressed and down on themselves when they come in for a free consultation at our Davie or Coral Springs office. In most cases, their credit is already shot because they have missed payments or are behind in their mortgage. In some cases, their bills are current but they know they cannot afford to make one more payment and proactively come in seeking advice.

A Chapter 7 bankruptcy will remain on your credit report for 10 years. A Chapter 13 will be on there for 7 years. But that doesn't mean that you won't have credit again for 7 to 10 years. To the contrary, most clients discover that they actually get a credit card within weeks or months of closing out their bankruptcy case. Without bankruptcy, there was no opportunity to get credit because of their credit scores.

Bad credit entries stay on the credit reports for 7 years from the date of last activity. If you are paying your cards through a debt consolidation plan, then it's 7 years from the date of last activity - which is usually when you settle a card. That could take months or years to do because you have to pay into the plan long enough to have a settlement offer available. You are not getting credit while you are making these payments.

Further, current FHA guidelines allow you to qualify for an FHA loan just two years after your Chapter 7 case closes if other conditions are also met. Try getting approved for a home loan while you're consolidating your debts or shortly thereafter!

Find out all the facts about bankruptcy and how it can actually help improve your credit score. Don't listen to friends, neighbors or the credit card companies. Get the facts! Call today for a free consultation. It could be the fresh start you are waiting for.

Although many well-intentioned people borrow against their retirement accounts in order to pay off credit card debt, it's actually one of the worse things you can do in the long run. Yes, it's very tempting. Some pension plans have a hardship withdrawal provision. The money is just sitting there and the creditors are bugging you non-stop. You really meant to pay the money back anyway...you just lost a job or had an illness and plans changed. But think about it carefully as there are tax consequences, retirement consequences and bankruptcy consequences.

Tax consequneces: Retirement investments are given favored tax-treatment by the IRS while you are saving the money. Normally, you don't pay taxes on money that you put in an IRA account or a company sponsored plan. If you cash out before you reach 59, you incur early withdrawal penalties and a tax penalty at the end of the year. You get back a lot less than what you put in and risk running up your tax bill.

Retirement consequences: I will never agree that it's a good idea to wipe out your future income in order to pay creditors today. There will come a time when you cannot work. Social security is not so secure and doesn't provide a lot of income anyway. You may not absolutely need that money today because you are working or still able to work - but there will come a time when you need it to survive. There are other things you can do to eliminate credit card debt other than eliminating your future income.

Bankruptcy consequences: Any withdrawal that you make from a 401(k) plan within the six months prior to filing a bankruptcy case is treated as income on the means test. In some cases, that is not a problem and you will still qualify for a Chapter 7 bankruptcy. In other cases, a withdrawal has put my client out of a Chapter 7 and into a Chapter 13 because they exceeded the median family income when I added in the withdrawal. Then the withdrawal gets counted as income for the purposes of determining your monthly payment to the court. Not a good idea.

If you are thinking of withdrawing money from a 401(k) to pay off credit card debt, pause first and schedule a free consultation in our Coral Springs or Davie office. Find out first if doing so will cause you unwanted consequences. Informed decisions are better decisions!

The treatment of alimony or child support in a Chapter 7 or Chapter 13 bankruptcy really turns on whether you are the person receiving the money or paying it. Neither one of these two domestic support obligations can be wiped out in either bankruptcy if you are the one paying it (and wanting to file bankruptcy). If you are paying it, you can deduct either one (or both) on the means test. If you are receiving it, you must report both as income on the means test. If your divorce settlement agreement lists any payment as a "domestic support obligation" then it cannot be wiped out in a bankruptcy by your ex-spouse trying to get rid of it.

If you are filing a Chapter 13 and owe either child support or alimony, being current on those payments (and staying current) is part of the requirement in formulating your plan payment. For example, if you are $2,000 behind on child support payments, your Chapter 13 plan must include the regular monthly payment AND it must also pay the $2,000 you are behind. By the end of the plan, you must be current on both obligations.

The short version of everything is this: If your ex-spouse files for bankruptcy protection, they cannot eliminate or discharge any domestic support obligation through a bankruptcy. If they are behind on their payments and filing Chapter 13, they are required to bring everything current while they are in bankruptcy court.

If you owe child support or alimony, a bankruptcy filing under either chapter will not eliminate these financial obligations.

The Number One question that most people have when inquiring about a Chapter 7 or a Chapter 13 bankruptcy is whether they will lose their home because of the bankruptcy. The short answer is no. You will not lose your home because of a bankruptcy filing. The house you live in is protected by Florida's constitution under Homestead Exemption. You can only lose your home if you are not making the payments on it.

Filing a Chapter 7 bankruptcy will not help you keep your home but it won't hasten the loss of it either. On the contrary, filing a Chapter 7 bankruptcy will slow down the foreclosure process and let you stay in your home a little longer.

Filing a Chapter 13 bankruptcy may help you keep your home because it offers an opportunity to catch up on your arrears (the amount of money you are behind) and a Chapter 13 also offers options in dealing with second mortgages and homeowner associations.