April 2018

FINANCE
Bankruptcy Protection Advice
for the Individual Debtor
by Alyssa C. Baer, Esq.
Filing a bankruptcy case does not cast a dark cloud over
a debtor’s financial future; rather, it is the exercise of a
constitutional right that leads the debtor to a financial fresh start.
This article is designed to highlight the benefits of bankruptcy
protection for the individual and eliminate the stigma that
prevents debtors from seeking advice that could prevent
financial ruin.
First, it is important
to understand the
different types of
bankruptcy filings.
Generally, individuals
will file a Chapter 7
liquidation or a Chapter
13 reorganization. A
Chapter 7 case involves
the liquidation of the
debtor’s assets over
the exemption amounts
permitted by law, while
the Chapter 13 case
involves commitment
of future disposable
earnings toward the
repayment of debts.
With either type of filing,
potential bankruptcy
debtors should consult
counsel sooner rather
than later. A skilled
bankruptcy attorney
could advise a debtor on
exemption planning so
that the debtor can retain more of his assets while eliminating
his debt. It is never too early to become educated about the
bankruptcy process. If you suspect any type of claim could
arise, including claims for unpaid debts or lawsuits (i.e. car
accident liability or breach of commercial or residential lease),
gaining knowledge about the process will come in handy.
It is important to talk to a bankruptcy lawyer before
liquidating assets to try to remain current with credit
cards. Many times the debt could be eliminated while
protecting and retaining the debtors’ exempt assets.
In Florida, exempt assets largely include a debtor’s
homestead, qualified retirement accounts, a limited
amount of personal property, and a limited interest in a
vehicle.
Most individual bankruptcy cases are filed after the debtor
suffers business failure or job loss, illness, divorce, or other
event that causes financial distress. Specifically, the late singer,
Marvin Gaye, filed a bankruptcy case
after financial struggles stemming
from a divorce. The Olympic figure
skating star, Dorothy Hamill, filed for
bankruptcy protection after making
several bad investments and suffering
a business failure. Other notable
individual bankruptcies were filed by
Paolo Gucci, grandson of the Gucci
label founder, Walt Disney, 50 Cent,
and the artist Rembrandt.
If you are experiencing financial turmoil
triggered by mounting credit card
debt, know that bankruptcy could
provide much-needed relief. An
ordinary Chapter 7 case is concluded
within 90 to 100 days of filing, and a
Chapter 13 case involves three to five
years of monthly payments before the
remaining debt is wiped out.
Once a bankruptcy discharge is
ordered by the court, the debtor
can take steps to rebuild his credit
expeditiously. These simple steps
include continuing to remain current
on mortgages and car payments,
obtaining a secured credit card, and
eventually obtaining a release of the security interest.
Bankruptcy protection can eliminate financial stress and provide
a debtor with the relief needed to make ends meet and start
saving money. The process begins with speaking to an attorney,
who will hear your story and provide you with tailored advice to
meet your needs. P
Alyssa C. Baer, Esq., practices in the area of Bankruptcy Law
at Brodzki Jacobs & Brook. She was an editor of the American
Bankruptcy Institute Law Review at St. John’s University School
of Law.
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APRIL 2018