Consumer Bankruptcy

Consumer Bankruptcy

Bankruptcy Filings Fall to Levels Not Seen Since 1985

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Bankruptcy filings have fallen to levels not seen since the mid-1980’s. The low number of filings are credited to the government aid and stimulus checks issued since the COVID-19 pandemic.

According to statistics from the Administrative Office of the U.S. Courts, 462,309 individuals and companies filed for bankruptcy in the fiscal year ending June 30, 2021, which is a 32 percent decrease from the previous year. The office also noted that this figure was the lowest one reported for a 12-month period since 1985.

Personal bankruptcy filings decreased 33 percent to approximately 444,000 over the course of a year. Business filings similarly declined, although by a lower percentage. Business bankruptcy cases dropped by 17 percent to approximately 22,500 filings.

Bankruptcy Law, Consumer Bankruptcy

Understanding the Ins and Outs of Bankruptcy

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The thought of filing for bankruptcy can conjure up all kinds of emotions. For many, all they know of bankruptcy is what they have heard from others or seen on television advertisements. However, the following information can be helpful in terms of understanding the ins and outs of consumer bankruptcy.

Types of Consumer Bankruptcy.

If a consumer is considering filing for bankruptcy, he or she has two options available. These options are based on the specific chapters within the U.S. Bankruptcy Code. The first option is called Chapter 7 bankruptcy, often referred to as a liquidation bankruptcy. A Chapter 7 case tends to take only several months to complete and involve the filer working with the bankruptcy trustee to sell nonexempt assets and pay off qualifying debts. At the end of the case, the remaining consumer debts held by the filer are discharged. However, to qualify for filing for Chapter 7 bankruptcy, the filer needs to be below a certain income threshold per the bankruptcy court’s means test.

The other option is Chapter 13 bankruptcy, which takes three-to-five years to complete and involves the filer working with the bankruptcy trustee to complete a structured repayment plan on the consumer’s debts. Chapter 13 cases, since they take longer, do cost more in terms of legal fees.

Consumer Bankruptcy

Fear Holds Many People Back from Ever Filing Bankruptcy

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There are many people who can benefit from bankruptcy, but put off filing due to fear and the myths surrounding bankruptcy. Bankruptcy offers consumers a fresh financial start and relief from the burden of debt, but for many, it is the fear of the unknown that holds them back from ever taking the first step. Every year, only a small portion of consumers who could benefit from bankruptcy actually move forward with starting a case.

According to the Federal Reserve Bank of New York, approximately 14 percent (14%) of U.S. households or nearly 17 million consumers owe more than they own. While most of these individuals could benefit from bankruptcy, less than one percent (1%) of them file for bankruptcy annually. In 2020, there were only 752,160 personal bankruptcies filed. 

Consumer Bankruptcy

Post-COVID Debt Continues to Grow as Bankruptcy Filings Fall in 2021

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Financial analysts had predicted a bankruptcy surge following the COVID-19 pandemic. Courts were closed for the majority of 2020, but as they began to reopen, it was believed that a massive wave of bankruptcy filings would follow. Oddly enough, that surge never came, and the number of consumer bankruptcy filings continue to drop.

According to figures from the American Bankruptcy Institute (ABI), 181,000 bankruptcy cases were filed in the U.S. by May 2021, which is 29 percent lower than the number of cases filed by that time in 2020. As many people were forced out of jobs or laid off with businesses temporarily or even permanently closing, consumers are continuing to rely on credit cards to cover expenses.

Bankruptcy Law, Consumer Bankruptcy

The Three Most Common Fears People Have When Filing for Bankruptcy

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The fear of losing everything is a very real concern for those contemplating bankruptcy. However, this is one of the most common bankruptcy myths, and can keep individuals who are drowning in debt from obtaining a fresh financial start.

To make the bankruptcy process a little easier to understand, we have dispelled the top three fears people have when filing for bankruptcy.

Consumer Bankruptcy, Legal Awards

Miami Bankruptcy Attorney Timothy S. Kingcade Named a Florida Super Lawyer 8 Consecutive Years

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Managing Shareholder, Timothy S. Kingcade of the Miami-based bankruptcy and foreclosure defense law firm of Kingcade Garcia McMaken has been selected for inclusion in Florida Super Lawyers 2021, in the practice area of consumer bankruptcy. This is the eighth consecutive year Kingcade has been selected to the Florida Super Lawyers list (2014-2021). The prestigious honor is awarded to only five percent of lawyers in the state.

After receiving one of the highest point totals, Kingcade was also selected to be on the Florida Super Lawyers Blue Ribbon Panel. Only those in each practice area with the highest point totals are asked to be part of the panel to evaluate the candidacy of fellow lawyers to enter the prestigious Super Lawyer rankings.

Consumer Bankruptcy, Debt Relief

Defaulting on Debt v. Filing Bankruptcy

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It can be tempting to want to walk away from debt in lieu of filing for bankruptcy. But doing so will not provide the consumer with the clean slate that a bankruptcy discharge offers. It is often better to face these debts in a Chapter 7 or Chapter 13 bankruptcy case instead of choosing to default on them.

Whenever a consumer fails to make payments on a loan or financial obligation, this failure to pay is otherwise known as a default. Lenders all have their own requirements on what exactly qualifies as a “default,” including how many payments have been missed before the account is officially considered in default.

Bankruptcy Law, Consumer Bankruptcy

Steps to File for Bankruptcy in 2021

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Bankruptcy is an important tool, that allows consumers to obtain a fresh financial start. For many, the concept of bankruptcy is unfamiliar, and understanding the steps needed to file for bankruptcy is important in fully understanding the process.  

Choosing a Chapter 

The first step is determining which type of bankruptcy to pursue. Bankruptcy is not a one-size-fits-all type of situation. Choosing the right type of bankruptcy hinges a great deal on the individual’s specific circumstances. The most common two categories used by consumers are Chapter 7 and Chapter 13 bankruptcy. For filers who fall under a certain level of income and can pass the mean test, meaning they earn less than Florida’s median income, Chapter 7 bankruptcy is the best selection for them.  Alternatively, if a consumer earns too much to qualify for Chapter 7, a Chapter 13 reorganization bankruptcy may be the best avenue for him or her.  

Bankruptcy Law, Consumer Bankruptcy

Will Filing Chapter 7 Bankruptcy Prevent Vehicle Repossession?

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When someone is behind on his or her car payments, a Chapter 7 bankruptcy case may allow him or her to catch up on these missed car payments, saving the vehicle from repossession. The ability to do this depends on how far behind the borrower is on his or her payments and whether the loan is already in default.   

While a Chapter 7 bankruptcy case will not permanently prevent the person’s vehicle from ever being repossessed, it can provide the borrower a chance to catch up on missed payments or negotiate with the lender before the loan goes into default.  

Bankruptcy Law, Consumer Bankruptcy

The Cost of Filing Bankruptcy in 2021

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Filing for bankruptcy comes with its own set of costs. It may seem counterintuitive that a person who is having difficulty paying his or her bills can pay extra costs to receive relief from his or her financial obligations. However, just because someone is not able to pay his or her bills should not prevent them from hiring an attorney to file their bankruptcy case. While “do it yourself” projects may be a good idea around the house, there are reasons to let a professional handle your bankruptcy filing.