Consumer Bankruptcy

What Property Can You Keep in a Chapter 7 Bankruptcy?

The fear of losing everything is a very real fear for many bankruptcy filers. However, this is one of the most common bankruptcy myths, and can keep individuals who are drowning financially from filing for bankruptcy. One concern many filers have is, what will happen to my property during bankruptcy?

The good news is Florida bankruptcy laws offer generous exemptions which allow individuals to keep various types of property. If an item of property falls under one of these exemptions, this means that the person can keep the property after filing for bankruptcy. Property that does not fall under one of these exemptions is considered nonexempt and can be sold by the bankruptcy trustee and used to pay down qualifying debts.

Bankruptcy Law, Car Repossession, Consumer Bankruptcy

What Happens to My Car During Bankruptcy?

Will filing for bankruptcy cause me to lose my car? The fear of losing everything is a very real fear for many bankruptcy filers. However, this is one of the most common bankruptcy myths, and can keep individuals who are drowning financially from filing for bankruptcy. One concern many filers have is, what will happen to my car during bankruptcy?

The good news is most filers will be able to keep their vehicles after filing for bankruptcy. Florida bankruptcy laws offer generous exemptions which allow individuals to keep various types of property, including their vehicle. Under the Florida Motor Vehicle Exemption, bankruptcy filers can exempt up to $1,000 in motor vehicle equity. This amount can be even more if a married couple is filing for bankruptcy jointly.

Consumer Bankruptcy

Debunking the Biggest Bankruptcy Myths

One of the biggest reasons consumers hold off on filing for bankruptcy has to do with the myths surrounding the process. Misconceptions are often the reason behind these myths. Debunking these bankruptcy myths can shed light on the legal process that can help (and has helped) so many people, including an estimated 885,000 American consumers last year.

Myth 1: Bankruptcy Irreversibly Damages a Consumer’s Credit Score

While, yes, a bankruptcy case will almost certainly hurt a consumer’s credit score, this damage is far from permanent. In fact, many consumers have successfully rebuilt their credit scores after successfully completing a bankruptcy case.

Consumer Bankruptcy

Fear Holds Many People Back from Ever Filing Bankruptcy

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. 

Bankruptcy Law, Consumer Bankruptcy

The Three Most Common Fears People Have When Filing for Bankruptcy

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.

Bankruptcy Law

Can I File for Bankruptcy and Still Keep My Car?

The fear of losing everything is a very real fear for many bankruptcy filers. However, this is one of the most common bankruptcy myths, and can keep individuals who are drowning financially from filing for bankruptcy. One concern many filers have is whether they will be able to keep their mode of transportation after filing for bankruptcy.

The good news is most filers will be able to keep their vehicles after filing for bankruptcy. Florida bankruptcy laws offer generous exemptions which allow individuals to keep various types of property, including their vehicle. Under the Florida Motor Vehicle Exemption, bankruptcy filers can exempt up to $1,000 in motor vehicle equity. This amount can be even more if a married couple is filing for bankruptcy jointly.

Bankruptcy Law, Credit Card Debt, Debt Relief, Timothy Kingcade Posts

How Debt Can Sabotage Your Retirement Plans

Getting out of debt can be tough at any age, but for those nearing retirement age the challenge can be particularly daunting.

According to an Experian study published in 2017, Baby Boomers hold on average approximately $188,828 in mortgage debt and over $27,000 in other debt. Consumers who are considered Generation X who are now entering their 50s hold even more debt, with $231,774 in mortgage debt and $30,334 in other debt.

While it is normally agreed that younger individuals are more likely to carry debt because they are just starting their lives and have a longer period to pay off the debt, the survey showed that only 18 percent of households with workers 50 years or older did not have any debt. The most common types of debt include: credit cards, mortgages and car loans.

People who carry debt tend to have less discretionary income to save for the future, especially when it comes to retirement. However, with pensions being eliminated and the uncertainty of Social Security benefits, the need to save for retirement is more important now than ever. It is a given that workers need to contribute towards their 401(k) accounts, which many do. However, more workers are also borrowing from their 401(k) accounts- and paying the price for it.

In fact, approximately one in six workers over the age of 50 have taken a loan from their 401(k) to pay off some other type of debt, an unplanned major expense, medical bills or other financial issue. In the past, emergency savings accounts were meant to help people through these types of financial issues, but currently, for workers who are over 50 years old have only an average of $10,000 in their savings accounts.

The problem with borrowing from a 401(k) is it can be risky for the borrower. Many times, if the person cannot repay the loan from the 401(k) within a set period for any reason, he or she will end up owing the IRS a great deal of money, which can include a 10 percent early withdrawal tax penalty.

Prior to the 2017 tax law, a person who borrowed from his or her 401(k) had 60 days after leaving a job to repay the loan, or a penalty would be assessed. However, for loans taken from a 401(k) after the start of 2018, and the person leaves a job, the borrower can put the money back into the plan, into an IRA or a new 401(k) plan up until October of the following tax year to avoid the penalty.

How are retirement accounts treated in bankruptcy?  Individual retirement accounts like 401(k)’s and IRA’s are protected in bankruptcy, along with social security and pensions worth up to $1.245 million are all exempt from creditors during bankruptcy. This means that retirement income and savings are out of reach and protected under federal law.  That is why you should never pull from retirement accounts to pay off debt like credit cards or medical bills you cannot afford to pay.

Some people think that filing for bankruptcy means they will lose everything.  That is one of the biggest bankruptcy myths out there.  To the contrary, you will likely get to keep a lot of your possessions including homes, cars and other assets.  A vast majority of Chapter 7 cases are “no-asset” cases, which means the debtor is not required to give up any of their possessions.

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If you have any questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

 

Bankruptcy Law, Credit, Credit Card Debt, Debt Relief, Timothy Kingcade Posts

Why Waiting to File Bankruptcy Can Hurt You

The decision to file for bankruptcy is never an easy one to make. There are a number of myths surrounding filing for bankruptcy, which can oftentimes lead people to wait.  It often can seem like an admission of personal or financial failure, and for this reason, many filers will hold off on filing for bankruptcy for years, allowing their financial issues to only worsen. In fact, the longer people wait to file for bankruptcy, the more likely they will end up struggling, according to a law review study recently published. By the time the individual files for bankruptcy, their personal life and well-being, as well as their financial situation will be damaged to the point where getting a fresh start can be extremely difficult.

Waiting Can Be Draining

The period of time before an individual files for bankruptcy is often referred to as a “financial sweatbox.” The filers are already under an immense amount of stress, are facing debt collector phone calls and lawsuits and are going without basic necessities to avoid the inevitable: having to file for bankruptcy. This “sweat it out” period can end up lasting for years before the person finally comes to the decision that bankruptcy is best for him or her. A recent Notre Dame Law Review piece titled “Life in the Sweatbox” focused on this period of time, showing how waiting it out can be more damaging than making the leap to file for bankruptcy sooner rather than later.

The study used data from the Consumer Bankruptcy Project, which is a long-term academic research project that focus on people who end up filing for bankruptcy, reviewing the reasons why they file, as well as the consequences. The data includes information from approximately 3,200 bankruptcy cases between the years 2013 and 2016. “Life in the Sweatbox” focuses on 910 of the 3,200 filers.

Of those surveyed, over 66 percent of them were determined to be “long strugglers,” meaning they had been in the sweatbox for over two years. Approximately one-third of them waited five years or more to file for bankruptcy. They reviewed statistics from 2007 which showed that the number of people who were “long strugglers” doubled in numbers.

The problem is the longer the people waited, the worse their financial situation became. Those who waited had half the median assets compared to other debtors who did not wait or did not wait as long. In addition, the median debt-to-income ratio of these long strugglers was over 40 percent higher than other debtors. Approximately 50 percent of the long-term strugglers were facing debt collection lawsuits while only 35 percent of the others were facing them.

It was discussed that the stigma that exists around filing is what keeps people from making that decision to file for bankruptcy. However, bankruptcy laws provide the ability for debtors to get a fresh start. Prolonging the decision to file only allows for assets to be depleted making it even more difficult for the person to get a true fresh start.

When to File for Bankruptcy

If a person’s debts are more than 40 percent of his or her income, it is recommended that he or she reaches out for financial guidance. Also, if the person is using debt to pay for basic necessities or other debts, this is another red flag that perhaps that person is in over his or her head.

A bankruptcy attorney can review what debts are crippling the individual. If they are unsecured consumer debts, including credit cards, personal loans or medical bills, these can all be wiped out in bankruptcy.  Lastly, if the individual is forgoing basic necessities such as food or medical care, it is highly recommended that he or she discuss options with a consumer bankruptcy attorney.

Click here to read more on this story.

If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

 

 

 

 

Bankruptcy Law, Credit, Debt Relief, Timothy Kingcade Posts

Myths about bankruptcy and your credit score debunked

There are many misconceptions surrounding the amount of time it takes to rebuild your credit after bankruptcy.  We are clearing up some of the common misconceptions about how bankruptcy affects your credit score.

Myth #1: All bankruptcy information stays on your credit report for ten years.

The Truth: Only the public record of a Chapter 7 bankruptcy lasts for ten years.   All other bankruptcy references remain on your credit report for seven years, including:  Line items stating “account included in bankruptcy;” Third-party collection debts, judgments and tax liens discharged in bankruptcy and Chapter 13 public record items.  Once these items begin to disappear, you will see a bigger boost to your credit score.

Myth #2: You will have poor credit as long as the bankruptcy information stays on your credit report.

The Truth: This is one of the biggest misconceptions and one that our clients can tell you is a complete myth.

My credit score said on all three reports 775, I couldn’t believe that I had such a great score before 10 years. Tim for me was the best move I have made for my situation. I have no regrets, I am glad the past is the past. – Bill T.

Hi Tim- I just wanted to send a quick note and thank you and your team for handling my bankruptcy case.  It is only a month or two after discharge, and my credit scores are already in the upper 600’s.  I’ve sent a screenshot in the event that you would like to use this to show prospective clients. – C.S.

You can begin to build your credit back with smart credit management.  Within a few years, you can obtain a “good” credit score ranging from 700 – 749 by doing the following:

  • Adding new credit, such as secured credit cards or small installment loans, to offset the negative information on your credit report;
  • Making on-time payments for all debt, new and old;
  • Keeping your credit card balances under 30% utilization.

Myth #3: Bankruptcy affects the credit of all filers equally, regardless of the amount of debt.

The Truth: Your credit score will factor in details such as the amount of debt discharged and the proportion of negative to positive accounts on your credit report. If you have a low amount of debt and only a few accounts included in your bankruptcy, your credit score will be higher than someone with a more severe bankruptcy case.

Myth #4: You cannot get a credit card or loan after filing for bankruptcy.

The Truth: Credit cards are one of the best ways to begin rebuilding your credit and you will be surprised how quickly offers for them will appear in your mailbox after filing for bankruptcy.  Secured credit cards, which require an upfront security deposit, allow you to spend and build credit easily and safely.

Myth #5: Bankruptcy will ruin your credit forever.

The Truth: Bankruptcy will damage your credit in the short term, but practicing good financial habits, can rebuild your credit to be stronger than ever. A report from the Federal Reserve Bank of Philadelphia showed that those who filed for Chapter 7 bankruptcy in 2010 had an average credit score of 538.2 on Equifax’s scale of 280 to 850. But the average score jumped to 620 by the time those bankruptcies were finalized, approximately six to eight months later. There are many ways to rebuild your credit after filing for bankruptcy. There are certain limitations you will face after filing, but taking advantage of the right financial tools can go a long way in helping you get back on the right path for your financial future.

If you have any questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

 

Bankruptcy Law, Credit, Debt Relief, Student Loans, Timothy Kingcade Posts

Top 5 Bankruptcy Myths Debunked

Filing for bankruptcy is not an easy decision and many people fear a social stigma after they file.  The truth is the stigma against debtors and those who file for bankruptcy has greatly decreased over the last 20 years, and there is no indication that debtors will be treated less favorably after filing for bankruptcy.  In fact, it is oftentimes easier to reestablish your credit after filing for bankruptcy, because you are essentially given a “clean slate.”

To make the bankruptcy process a little easier to understand, we have dispelled the top five bankruptcy myths.

Myth 1: You will lose everything. You may think that filing for bankruptcy means you have to give up your home, your car, your flat screen TV, and all of your assets.  This is simply not true. The vast majority of Chapter 7 cases are no-asset cases, meaning the debtor gives up no possessions. This happens for two reasons. First, you can allot for basic assets, called exemptions that are necessary for day-to-day living. What you can exempt varies from state to state, so be sure to discuss exemptions with an experienced bankruptcy attorney. For possessions that are not part of the exemption, creditors likely don’t want them.  Under Chapter 13, you keep all of your assets, but the value of them figures into your repayment plan.

Myth 2: You will be relieved of all your debts. Both Chapter 7 and Chapter 13 bankruptcy will provide you relief from most of your debts. However, there are some exemptions. These include: recent taxes, child or spousal support, student loan debt, and debts that are the result of fraud you have committed.

Myth 3: Paying off your debt is a better option. Filing for bankruptcy is the biggest financial decision you will ever make, but it doesn’t mean it is a bad idea. If your debts are more than 50% of your annual income and you cannot pay them off in five years, bankruptcy is likely your best option.

Myth 4: Filing for bankruptcy means I have failed. Given that the number one reason for filing for bankruptcy is due to medical debt, this could not be less true.  No surprise, the cost of medical deductibles has grown seven times faster than wages have risen. Many bankruptcies are likely the result of stagnant wages, not poor financial mismanagement.  Whatever your reason is for filing, think of bankruptcy as a tool that can help you get a fresh start and take control of your finances.

Myth 5: Bankruptcy will ruin my financial future. A report from the Federal Reserve Bank of Philadelphia showed that those who filed for Chapter 7 bankruptcy in 2010 had an average credit score of 538.2 on Equifax’s scale of 280 to 850. But the average score jumped to 620 by the time those bankruptcies were finalized, approximately six to eight months later. There are many ways to rebuild your credit after filing for bankruptcy. There are certain limitations you will face after filing, but taking advantage of the right financial tools can go a long way in helping you get back on the right path for your financial future.

If you are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Related Resources:

http://www.csmonitor.com/Business/Saving-Money/2016/0613/Five-bankruptcy-myths-dispelled