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Filing for Bankruptcy? Understanding the Basics

Navigating the complex landscape of bankruptcy can be a daunting task. It’s a process laden with legal intricacies, financial implications, and emotional weight.

This guide aims to demystify bankruptcy, providing a clear understanding of its types, processes, and common myths.

Remember, while this article provides a foundational overview, the guidance of a qualified bankruptcy attorney is invaluable in navigating this complex terrain.

What is Bankruptcy? The Basics

At its core, bankruptcy represents a legal proceeding involving a person or business that cannot repay their outstanding debts.

The process begins with a petition filed by the debtor (in most cases) or on behalf of creditors. All of the debtor’s assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt.

Bankruptcy offers a fresh start for the financially distressed while providing creditors an opportunity to obtain a measure of repayment based on the individual or business’s assets available for liquidation.

This process is governed under federal law, primarily aimed at giving people burdened with debt a chance to start anew, ensuring fairness to creditors where possible.

Different Types of Bankruptcy

  1. Chapter 7 – Liquidation Bankruptcy:
    • This is the most straightforward form of bankruptcy.
    • Suitable for individuals who don’t have significant assets and whose income is lower than the median level in their state.
    • It involves liquidating assets to repay debts.
    • Debts like unsecured credit card debt and medical bills can be discharged.
    • The process typically takes 3-6 months.
  2. Chapter 11 – Reorganization Bankruptcy:
    • Often associated with businesses, but individuals can file too.
    • Allows for restructuring of debts and business operations.
    • Debtors typically retain control of their operations as “debtors in possession,” but under the oversight of the court.
    • The process involves a reorganization plan, detailing how debts will be handled.
    • It’s more complex and typically more expensive than other forms of bankruptcy.
  3. Chapter 13 – Wage Earner’s Plan:
    • Designed for individuals with regular income who can pay back a portion of their debts through a repayment plan.
    • Allows debtors to keep their property, including nonexempt assets.
    • Involves creating a plan to repay debts over three to five years.
    • At the end of the repayment period, remaining unsecured debts may be discharged.


Man learning the basics of bankruptcy


Common Myths and Misconceptions

  1. Bankruptcy Ruins Your Credit Forever: While bankruptcy does impact your credit score, it’s not a permanent mark. A Chapter 7 bankruptcy stays on your credit report for up to 10 years, whereas Chapter 13 stays for seven years. Post-bankruptcy, individuals can take steps to rebuild their credit.
  2. You Will Lose Everything in Bankruptcy: Not true. Bankruptcy laws provide exemptions that protect certain types of assets, like a portion of equity in your home, your car up to a certain value, retirement accounts, household goods, and clothing.
  3. All Debts Can Be Wiped Out in Bankruptcy: Certain types of debts, such as student loans, child support, and alimony, are typically not dischargeable in bankruptcy.
  4. Filing for Bankruptcy is a Personal Failure: Many people face bankruptcy due to unforeseen circumstances like medical emergencies, unemployment, or divorce. It’s a legal tool provided to offer individuals a second chance at financial stability.

The Importance of Hiring a Bankruptcy Attorney

Navigating bankruptcy requires a thorough understanding of legal procedures and financial implications. Here’s why hiring a bankruptcy attorney is critical:

  1. Expert Guidance: Bankruptcy laws are complex and vary by state. An experienced attorney can provide guidance tailored to your specific financial situation.
  2. Error-Free Filing: Mistakes in your bankruptcy paperwork can result in delays or even dismissal of your case. Attorneys ensure that filings are accurate and deadlines are met.
  3. Representation in Court: If any legal issues arise, having an attorney to represent your interests in court is invaluable.
  4. Maximizing Your Benefits: An attorney helps in understanding and utilizing state exemptions to protect as much of your property as possible.

Bankruptcy, often viewed as a last resort, actually stands as a vital financial tool for individuals and businesses facing insurmountable debt.

Understanding the different types of bankruptcy and the common misconceptions surrounding them is crucial. However, the complexities of the bankruptcy process make the guidance of a knowledgeable attorney not just a benefit, but a necessity.

By seeking professional legal advice, you can navigate the bankruptcy process more effectively. This ensures that you make informed decisions for a better financial future.


Where Can I Find Help?

Dealing with bankruptcy doesn’t have to be a single-person job. The bankruptcy lawyers at Parker & DuFresne will help you determine the best course of action to help you get out from under your debt and move forward to a debt-free future.

Call today at 904-733-7766 for a free consultation, or click the button at the top of the page to schedule online.


Florida Bankruptcy Lawyers

Parker and DuFresne

Parker and DuFresne