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Orlando Bankruptcy Law Blog

How to avoid another bankruptcy

You have just completed the bankruptcy process, and although it led to positive results and a chance to start fresh, you probably do not want to go through it again. That is why it includes mandatory credit counseling courses both before and after.

However, attending just two classes is not going to guarantee you are safe from another bankruptcy. Frequently review the following tips to ensure you are staying on track toward financial security.

Is filng Chapter 7 or Chapter 13 bankruptcy the right choice?

Though many consumers in Florida and all around the country have recently seen some positive changes in the economy, there are families that are still struggling to make ends meet. Some may have experienced a job loss, while others may face a mountain of unpaid bills. While certainly not the first solution, some residents realize that filing for Chapter 7 or Chapter 13 bankruptcy may help them more quickly recover financially.

The Federal Reserve reports that at the end of 2017, the country had over $13 trillion in household debt. This total includes over $1 trillion in credit card debt, $1.2 trillion in car loans, $1.4 in student loans and $8.8 trillion in mortgages. According to the nation's Trustees Program, over 700,000 individuals and businesses are projected to file for bankruptcy relief in 2018.

Don't incur credit card debt for these expenses

Consumers in Florida and all around the country routinely use their credit cards for a variety of reasons. Convenience is often a major factor in the usage of the cards, since almost every vendor accepts them as a form of payment. However, with credit card debt now exceeding $1 trillion, experts are sending some warning signals. A major credit reporting agency has developed a list of expenses that should never be charged to a credit card.

Topping the list, the agency recommends never using credit cards to pay for income taxes. A merchant processing fee is charged by the IRS and any third-party software vendors. Financial advisors stress that paying fees and interest on money owed for taxes is not a wise idea. In addition, it is more prudent to pay college tuition with a student loan instead of credit cards. The interest rate on student loans is typically much lower than that for cards.

Consumers would use extra cash to pay off credit card debt

What could someone do with an unexpected, tax-free windfall of $10,000 in cash? One might expect the answer to be different across all age groups in Florida and elsewhere around the nation. However, a recent survey revealed that the most common answer for all generations was to pay down debt, particularly credit card debt.

The survey, conducted by an online lending company, showed that burgeoning credit card balances are a major concern for people across the board. Experts acknowledge that, once a consumer has a balance, it becomes increasingly harder and harder to eliminate it. This results in potential financial problems down the road.

Those looking to file Chapter 7 bankruptcy must pass a means test

Chapter 7 bankruptcy is called the liquidation chapter in Florida and elsewhere. The name is deceptive because filers generally keep their personal belongings and furnishings due to state exemptions. With respect to real estate, the state has one of the more liberal exemption laws, which allows for an unlimited homestead exemption under certain circumstances. The best way to determine whether one qualifies for the unlimited homestead exemption is to obtain a consultation with an experienced Chapter 7 bankruptcy attorney.

In many states, a debtor may choose to assert either the federal bankruptcy exemptions or the state exemptions. In Florida, however, only the state exemptions are available. An experienced bankruptcy attorney will guide the client through the exemptions so that most or all personal possessions are retained. The reason why Chapter 7 is preferable for most consumer debtors is that it provides a discharge for all unsecured debts.

Cost of filing for Chapter 7 bankruptcy may be worth results

Financial concerns can make struggling Florida residents question every use of their money. Even when it comes to finding debt relief, they may wonder whether they should put funds toward a particular method. These worries are valid as some companies claiming to offer relief may only make matters worse. However, utilizing a proven method such as Chapter 7 bankruptcy may be worthwhile.

Bankruptcy can and has helped numerous people get their finances back on track after facing considerable debt. Of course, it will cost most individuals some money in order to get the ball rolling on this relief avenue. In particular, for 2018, the federal court set the basic filing fee for Chapter 7 bankruptcy at $335. Because this is the amount applicable for basic fees, there may be circumstances that lead to more costs.

What you should know about Chapter 7 debt relief and divorce

Most Florida residents understand that changes in life often include those having to do with finances. Any number of issues can impact one's financial status but a particular instance with a potentially substantial impact is divorce. Some people mistakenly think they can accept debt in settlement, then try to discharge the debt through a Chapter 7 bankruptcy debt relief process. 

The more you research and understand ahead of time, the less obstacles you are likely to encounter concerning your potential financial situation following divorce. For instance, it's critical to understand that it is unlikely that a financial liability you accept as part of your settlement would be dischargeable through Chapter 7. Rather, the court may consider it as a form of alimony, which is not dischargeable.

VA helps veterans in hurricane areas avoid home foreclosure

Loans from the Department of Veterans Affairs have enabled many members of the military -- both active and retired, as well as their spouses -- to obtain mortgage loans for the purchase of  homes. Unfortunately, many veterans are facing home foreclosure since they are unable to make their mortgage payments. Officials from the VA have intervened on behalf of those veterans who were affected by the 2017 hurricanes that hit Florida and other areas in the country.

The VA initially asked lenders to halt the foreclosure process for veterans for 90 days after Hurricanes Harvey, Irma and Maria affected the country. Officials then requested that lenders stop foreclosures for 180 days. The latest request is that foreclosures be stopped for 270 days. The lenders are the ones that ultimately make the decision to stop the process. However, if a lender does halt the foreclosure, the VA can collect additional interest.

Fed's increasing rates will hurt those with credit card debt

Most Florida residents and others around the county often feel somewhat removed from the decisions made by the Federal Reserve. However, a recent action by the nation's central banking system may have a significant impact on many consumers. It was announced that the Fed was raising the interest rate by a quarter of a percentage point. While this increase sounds rather small, those people carrying credit card debt will feel its effects.

A personal finance website reported that consumers have incurred over $90 billion in new credit card debt in the past year. Declining numbers of charge-offs and defaults have led many lenders to offer credit cards to more consumers. However, the interest rate increase by the Federal Reserve will end up costing consumers more money. As credit card companies follow the Fed's lead and increase their rates, those carrying balances will have to pay more interest.

Florida bankruptcy and student loans

Many people struggle with student loan repayments in addition to other types of debt. Those considering bankruptcy often want to know whether filing a petition can help with this burden.

Generally, both private and federal student loans belong to the category of nondischargeable debt, which means a Chapter 7 or Chapter 13 filing, on its own, will not reduce payments or cut repayment short. However, an exception to this rule does exist.

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Paul Urich
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Orlando, FL 32803
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