Using Bankruptcy to Manage Debt

In this economy, there are many people who have always been financially stable who are now struggling to make ends meet. Whether you lost your job or ran into trouble with credit card debt, you may be in desperate need of debt relief.

At the law office of Stenstrom, McIntosh, Colbert & Whigham, P.A., our attorneys have been helping clients throughout Central Florida resolve their legal matters since 1954. When clients contact our firm, we help them set realistic expectations and determine if Chapter 7 or Chapter 13 bankruptcy could be the right solution for them.

A Fresh Start

Congress intended our bankruptcy laws to provide the honest but unfortunate debtor a fresh financial start, while giving creditors a fair distribution of a debtor's assets. People seeking a fresh start come from all walks of life and income levels. Often, bankruptcy results from sudden, unfortunate circumstances such as illness, unemployment or divorce. Such hardships may result in large credit card debts or medical bills. These are the types of setbacks Congress intended to remedy with the fresh start provisions of the Bankruptcy Code.

To achieve a fresh start, a debtor in bankruptcy receives a forgiveness of debt, known as a "discharge." Lifting the heavy weight of overwhelming debt allows an individual to become a productive, contributing citizen and have a positive impact on the nation's economy. At the same time, creditors receive a fair distribution of a debtor's assets, where assets are available.

Debtors Keep Exempt Property

Certain assets are protected by state or federal law from claims of creditors. Such assets are "exempt" and are not subject to liquidation by the trustee. In other words, a debtor is permitted to keep exempt property.

The Automatic Stay

Bankruptcy provides an umbrella of protection to a debtor, known as "the automatic stay." The automatic stay prohibits creditors from engaging in certain types of collection activity while a bankruptcy case is proceeding. The debtor gets time to make critical decisions such as which assets to keep and which assets to surrender to a creditor so the corresponding debt may be discharged

Liquidation - Chapter 7

For individuals who satisfy the income eligibility requirements known as the "means test," a Chapter 7 bankruptcy case permits the discharge of unsecured debts such as credit card and medical bills. A debtor's unprotected assets are liquidated by a Chapter 7 trustee. Monies are paid to similarly situated creditors who receive a pro rata distribution of the liquidation proceeds. Secured creditors, those holding collateral such as a mortgage on a home or a lien on an automobile, are entitled to timely payments or to the return of their collateral.

Reorganization - Chanters 13

Individuals with regular income exceeding the income eligibility requirements of a Chapter 7 liquidation case may elect to file a Chapter 13 reorganization case. Chapter 13 also may be appropriate when a debtor with a regular source of income desires to keep his home and to pay any arrearages owed over a period of time. Chapter 13 also helps debtors who owe income taxes. Rather than paying creditors directly, debtors in a Chapter 13 reorganization case make monthly payments to the Chapter 13 Trustee, who then pays the debtor's creditors pursuant to a plan approved by the Court.

The Trustee and Creditors' Meeting

In all Chapter 7 liquidation and Chapter 13 reorganization cases filed by individuals, a trustee is appointed to oversee the case and to determine whether a debtor has assets available to administer, or liquidate, for the benefit of the debtor's creditors.

Soon after an individual debtor files a Chapter 7 or Chapter 13 case, the appointed trustee presides over a meeting of creditors. All debtors are required to attend this meeting. Creditors can ask about the debtor's financial affairs and determine if there are any reasons the debtor should not receive a discharge.

Achieve the financial freedom you've been waiting for. Contact one of our lawyers online or call us at 407-322-2171 or toll free at 800-247-5225 to schedule your no-cost initial consultation.