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The advantages and disadvantages of filing for bankruptcy

Many people come in to see me to determine what the best course is for them financially.  One question that is almost always asked is what will this do to my credit?  My answer is always you are here to see me so your credit is bad now or it’s about to be.  Your credit report is like a report card.  If you have a lot of debt, but are current with your payments, that is like a C.  If you are delinquent in payments, that is like an F.  If you are in foreclosure, that is like an F.  A Bankruptcy is like another F, but now there is a line beneath the bankruptcy on your credit report.  Future creditors (lenders) want to see what you have done after the bankruptcy has been completed.  Are you holding a lot of credit cards and making less than full payments every month?  If so, you will start to get C’s again.  Banks do not like to see C’s, D’s or F’s.  Once the bankruptcy is filed, you must be prepared to reestablish your credit and have only A’s.  Get a credit card with a minimal credit limit, and make a charge every month.  Buy gas or groceries.  As soon as the bill comes in, pay it in full immediately.  Within two years of filing your bankruptcy, your credit should be in the mid-700’s.  

The main benefit of filing a Chapter 7 or Chapter 13 bankruptcy in Miami or Ft. Lauderdale is that you immediately get to a point where you owe $0.  If you go to a credit repair company, that may delete bad credit reporting, but it may not be permanent.  If you go to a debt consolidation company, it may take years to settle any claims that your creditors may have with you.  Also, anytime you settle for less than the full amount that you owe, your credit may send you a tax form 1099 so that you are now liable to the Internal Revenue Service for the amounts that you didn’t pay back to the creditor in the deal that was made by the debt consolidation company.  Now you owe income taxes instead of credit card debt or medical debt.  In my opinion, Chapter 7 or Chapter 13 is the best option in these situations where you have a lot of credit card or medical debt.

Sometimes, when people come in to see me, my opinion is to not file for Chapter 7 or Chapter 13 bankruptcy in Miami or Ft. Lauderdale.  Some people have the money to get out of debt.  They just need to manage their money better.  When people come in to see me, I try to put myself in their shoes.  I always think, what would I do if I was in their situation.  I have filed bankruptcy for friends  in Miami or Ft. Lauderdale.  I have seen how it helped them, and see how well they have done after they filed the bankruptcy in Miami or Ft. Lauderdale.  The pressure and stress they felt before they filed the bankruptcy was immense.  They all had strains on their marriages, and they never said they were doing well when I casually asked.  But after they filed their bankruptcy, whether it was a Chapter 7 or a Chapter 13 in Miami or Ft. Lauderdale, their whole outlook on life changed.  It was such a relief.  It made me so happy to have been a part of helping my friends.  

If you are going through some of the financial pressure and stress associated with having debt, give me a call for a free consultation.  Hopefully, I can do for you what I have done for my friends.

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