Considering Bankruptcy?

Here is what you need to know before you file.

Do you ever wish you could hit a reset button sometimes?  Life can be unforgiving and throw challenges our way. Events like medical emergencies, job loss, divorce, foreclosure, or simply mounting bills can seem impossible to manage. If you’re reading this, you might be experiencing something similar, feeling overwhelmed and wondering if bankruptcy is an option for you. First, take a deep breath. You’re not alone. In fact, last year bankruptcy surged nationally by 11% and 23% in Florida alone. Florida had +40,000 bankruptcy filings during July 2024 and July 2025. To read the full article, click here. If you’re considering Bankruptcy, I encourage you to venture forward as we will get transparent on what Bankruptcy is and how it can affect you.

What is Bankruptcy?

Bankruptcy is a legal process that allows individuals or businesses to get relief from debts they cannot pay. It can provide a way to either eliminate some or all of your debt. Essentially, it’s a way to reset your financial situation, giving you a chance to start fresh. While it might feel intimidating, understanding the basics can help you make informed decisions about whether it’s right for you.

Types of Bankruptcy

There are several types of bankruptcy, but the most common for individuals in the U.S. are Chapter 7 and Chapter 13:

Chapter 7 Bankruptcy – “Liquidation”

Your non-exempt assets may be sold to pay creditors.

• ·  Non-exempt assets: These are possessions that the law allows the bankruptcy trustee to sell to pay debts. Examples can include expensive vehicles, valuable collectibles, or additional real estate that isn’t your primary home.
• ·  Exempt assets: These are properties you’re allowed to keep under state or federal law. Common exemptions include your primary home (homestead exemption), personal belongings, clothing, household items, tools of your trade, and sometimes a vehicle up to a certain value.

Most unsecured debts, like credit card debt or medical bills, can be discharged under Chapter 7, giving you a fresh start. The process is usually fast, often taking 3–6 months. However, not everyone qualifies—income limits determine eligibility.

Chapter 13 Bankruptcy – “Reorganization”

Chapter 13 is sometimes called “reorganization” bankruptcy. Instead of selling your assets, you create a court-approved repayment plan to pay back some or all of your debts over 3–5 years.

• Keep your property: One of the main advantages of Chapter 13 is that you can keep your home, car, and other property as long as you follow the repayment plan.
• Debt repayment plan: The plan is based on your income and the amount of debt, and it allows you to pay creditors gradually rather than all at once.

Chapter 13 is ideal for individuals with steady income who want to prevent foreclosure, catch up on missed mortgage payments, or reorganize their finances without losing their assets.

Other Types

• Chapter 11: Mostly used by businesses or individuals with very large debts. It allows for debt restructuring while continuing operations.
• Chapter 12: Designed specifically for family farmers or fishermen with regular income who need to reorganize debt.

How Bankruptcy Can Affect You

Filing for bankruptcy is a serious decision and comes with both consequences and protections. Understanding how it impacts your finances can help you make informed choices:

Credit Impact

Bankruptcy will affect your credit score and remain on your credit report for several years, usually:

• Chapter 7: Up to 10 years
• Chapter 13: Up to 7 years

While this may sound daunting, many people find that their credit gradually improves after bankruptcy as they regain control of their finances and make consistent, responsible payments.

Asset Protection

One of the most important aspects of bankruptcy is understanding what you can keep:

• Exempt assets: These are protected by law and cannot be taken to pay creditors. Common exemptions include your primary home, personal belongings, household goods, tools of your trade, and sometimes a vehicle up to a certain value. This ensures you can maintain a basic standard of living.
• Non-exempt assets: These are items that may be sold by the bankruptcy trustee to pay creditors. Examples could include additional real estate, luxury vehicles, or valuable collectibles.

In Chapter 7, non-exempt assets may be liquidated, while exempt assets remain yours. In Chapter 13, most or all of your property is typically protected because you are paying creditors through a repayment plan rather than selling assets.

Debt Relief and Payment Plans

• Discharge of debts: In Chapter 7, many unsecured debts like credit cards, medical bills, and personal loans can be eliminated, giving you a fresh start.
• Repayment under plan: In Chapter 13, you repay a portion or all of your debts over a few years, depending on your income and assets. This structured plan can prevent foreclosure and repossession while helping you get back on track financially.

Other Considerations

• Employment and housing: Some employers or landlords may consider bankruptcy when evaluating applications, but most do not make it an automatic disqualifier.
• Psychological relief: Many people experience reduced stress and anxiety after filing because they have a legal solution to manage overwhelming debt.

Bankruptcy is a reset button, not a failure. Knowing what assets are protected and how your debts will be handled allows you to make smart, informed decisions. Many people find that after bankruptcy, they are more disciplined with money, reduce stress, and regain control of their lives.

Ways to Prevent Bankruptcy

Why You Need Qualified Legal Help to Guide You In Bankruptcy

• Explain which type of bankruptcy fits your situation.
• Protect your rights and guide you through the legal process.
• Ensure you follow all legal requirements to avoid future issues.

Trying to handle bankruptcy alone is very risky. Professional guidance is critical.

Here are Some Resources to Help You

U.S. Courts – Bankruptcy Basics

National Foundation for Credit Counseling – Certified credit counselors

American Bar Association – Find Legal Help – Locate bankruptcy attorneys

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