Should You Try to Pay Off Your Debt or File for Bankruptcy?
Are you currently struggling with debt and trying to figure out how you might be able to get back on track financially? If so, you may be looking at a wide range of options for debt relief, including the possibility of debt consolidation, debt settlement, bankruptcy, or simply trying to find the money to pay off some or all of what you owe. In particular, you may be considering withdrawals from certain types of accounts — namely, retirement funds — that would require taking a penalty to withdraw money in order to pay off some of your debts. You may be wondering if this is a sound decision or if you should consider other options.
In short, if you are considering a personal bankruptcy filing under Chapter 7 or Chapter 13, it is extremely important to avoid trying to pay off certain debts with retirement money or other exempt assets prior to your bankruptcy filing. Our West Palm Beach bankruptcy attorneys can explain in more detail.
Pros and Cons of Paying Off Debts Before a Chapter 13 Bankruptcy Filing
For anyone who is considering a personal bankruptcy filing, it is important to be very careful about which debts you pay off prior to filing for bankruptcy and where you source the money to pay off those debts. The type of bankruptcy you are considering will also affect whether or not it makes sense to try to pay off certain debts before you file a petition for bankruptcy.
If you are planning to file for Chapter 13 bankruptcy, making the decision to use any of your available resources to pay off nonpriority unsecured debts could result in you having to pay more in the long run. In a Chapter 13 bankruptcy case, secured and priority debts must be repaid over the term of the repayment plan, so it could make sense to pay some of those prior to your bankruptcy filing. However, certain remaining non priority unsecured debts can often be discharged at the end of your repayment plan. Accordingly, you should not make any debt payments until you have spoken to a lawyer.
Chapter 7 Bankruptcy and Repaying Debts Prior to Filing
For those planning on a Chapter 7 bankruptcy filing, all of your non-exempt assets will be liquidated so that creditors can be repaid as fully as possible, but remaining eligible debts can be discharged. Once remaining debts are discharged, you will have a fresh financial start. If this is the type of bankruptcy you are planning on, it is critical to avoid liquidating any exempt assets prior to filing in order to repay creditors in whole or in part. Certain assets are “exempt” under Florida law, which means that they cannot be liquidated in your Chapter 7 case — you will get to keep those assets. As such, you do not want to liquidate them shortly before you file for Chapter 7 bankruptcy in order to repay creditors.
There are a wide range of exemptions under the Florida Statutes, and you should discuss your assets and relevant exemptions with a bankruptcy lawyer in South Florida. Examples of exemptions include the homestead exemption (through which you can exempt all equity in your home), retirement accounts, many public benefits, and much more.
Contact Our West Palm Beach Bankruptcy Lawyers Today
When you are struggling with debt, it can often be difficult to think clearly about the options that may be available to you to get out of debt and to get a fresh start. For anyone who is considering drastic measures such as early withdrawals from retirement accounts to pay off credit card debt, it is important to learn more about other options that are likely to be more beneficial to you in the long run. Do not hesitate to get in touch with an experienced West Palm Beach bankruptcy attorney at Kelley, Fulton, Kaplan & Eller to find out more about how our firm can assist you. We can provide you with more information about exempt assets, and if you decide to file for bankruptcy, we can begin working with you on your case today.
Source:
leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222ContentsIndex.html
