When most people think of Bankruptcy they think of the way it used to be, an embarrassing process that left a stigma of failure and which pretty much prevented the debtor from ever getting good credit again.
Bankruptcy is now a streamlined process which is free of any stigma and can be accomplished relatively quickly and easily. Good credit can usually be regained within 18 to 24 months, if the debtor pays remaining bills on time and maintains a good credit history after Bankruptcy.
In fact, one of the biggest problems we, as Bankruptcy attorneys, have with some of our clients, is that our clients are sent credit cards by banks immediately after bankruptcy!(sometimes even while they’re in Bankruptcy!!).
You might think this makes no sense and have trouble believing it, but consider this: A person is a better risk to the credit card companies after Bankruptcy than before it!
The reason is simple. Before bankruptcy the person can create debt, but then can wipe it away by a Bankruptcy when he files. After bankruptcy, if the person uses a credit card and doesn’t pay a debt, the credit card company can sue him and eventually get a judgment or even a garnishment of that individual’s wages. That person can’t file bankruptcy again for 6 years, so he can’t get rid of the new debt. He can’t call a Bankruptcy attorney and has no one to turn to. He’s stuck…and the credit card companies know this! So they throw cards at every debtor that comes out of Bankruptcy to try to get them hooked again, hoping they will once again run up a big balance.
Bankruptcy is a right guaranteed by the United States Constitution and is designed to give “the honest debtor a fresh start”. There is nothing “wrong” or shameful about filing a Bankruptcy. It is not a government handout or entitlement. It is every citizen’s right, by law, and is meant to put honest people back on their feet. The government knows this is the best way to make an individual a productive citizen again.
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A Chapter 7 Bankruptcy is what most people think of when they think of a Bankruptcy. It is the kind of Bankruptcy that completely forgives unsecured debt, such as credit card debt or medical bills and other types of personal debt.
A Chapter 13 Bankruptcy is one which allows the individual to repay some or all of his unsecured debt, while catching up on his secured debt until it is current. This type is usually used when the individual wants to save a home which they are severely behind in payments on, or which may even be in foreclosure. Chapter 13 allows the debtor to keep the home, and prevent the foreclosure while he catches up on the arrearages.