Earlier this week, our Miami bankruptcy law blog began discussing some common misunderstandings individuals have about bankruptcy. We will continue the discussion today and focus on ways in which bankruptcy can help Florida residents regain control of their finances.
Besides worrying about losing one’s car or home, individuals considering bankruptcy also have concerns about losing their retirement accounts. In a bankruptcy proceeding, 401(k) plans and IRAs are considered exempt unless an individual accessed money from the accounts prior to filing bankruptcy.
When individuals hit financially difficult times, they often resort to cleaning out their savings accounts and taking funds out of their retirement accounts in order to manage their finances. However, before individuals choose to drain their savings and retirement accounts, they should consider how permanent or temporary their situation is. If bankruptcy is an option, then they may want to hold off on accessing funds from their retirement accounts.
Many believe that filing bankruptcy will destroy one’s credit. The fact is, filing for bankruptcy does damage one’s credit but the damage is only temporary. A person’s credit will tend to improve after 10 years from filing for bankruptcy protection. Another myth is that creditors will not lend new money to individuals who have filed bankruptcy. However, many individuals have been able to get loans after a bankruptcy. Creditors may be more willing to lend to those who have had their bankruptcies discharged and finalized.
Although there are restrictions when filing for bankruptcy in Florida, there are also different types of options available. All debtors are eligible to file bankruptcy, but an individual’s income and assets will affect which type of bankruptcy the debtor qualifies for. Discussing one’s income and assets with a bankruptcy attorney is very helpful when determining whether Chapter 7 or Chapter 13 will be a better solution for the individual’s unique financial situation.
San Francisco Chronicle: “5 Myths About Personal Bankruptcy,” Angie Mohr, 5 May 2011