Understanding Bankruptcy: Before You File

We represent clients facing financial difficulties because of a job loss, unexpected medical expenses or accumulated debt that exceeds their ability to repay. Bankruptcy is an option to consider when other debt relief strategies are exhausted. Understanding what bankruptcy can and cannot do, and what is expected of you, is essential.

Points to Consider About Filing for Bankruptcy

Debt that Cannot be Discharged 

Filing for bankruptcy can help you get a fresh financial start free of the stress of unmanageable debt. A primary feature of bankruptcy is the discharge of debt. In both Chapter 7 and Chapter 13 bankruptcy, either all or some of your eligible debt is eliminated. But not all debt qualifies for discharge, including: 

• Alimony and child support are not eligible
• State and federal taxes are usually not subject to discharge
• In most cases, student loans cannot be eliminated
• Restitution, fines or penalties resulting from criminal actions, including judgments related to drunk or impaired driving, remain your responsibility
• Debts that were incurred by fraud or that were not listed on your petition for bankruptcy remain your obligation
• Obligations toward a former spouse related to debts assigned to you in a family law or divorce judgment

Debt and Divorce

We talked earlier about foreclosure during divorce. If you are thinking about divorce or already in the process of divorce, working with an experienced attorney is essential to protecting your financial well-being.  

If you are divorced and you file for bankruptcy, creditors of your bankruptcy may still take actions to pursue your former spouse if a debt you are seeking to discharge in your bankruptcy was a joint debt, even if the debt was allocated to you in the divorce. But if your former spouse ends up having to pay a debt assigned to you in the divorce, your former spouse may be able to obtain relief against you from the bankruptcy court or the family law court.

Debt Counseling

As part of changes made to the Bankruptcy Code in 2005, consumers are required to attend financial counseling in person or via the Internet. Two sessions are required, one prior to filing for bankruptcy and one prior to discharge of debt. 

In Florida, knowing what to expect from bankruptcy — and what is expected of you — is important before you file. Talk to an experienced Jacksonville bankruptcy attorney about the best debt relief option for you. 

Attorney Shane Herbert also contributed to this blog post.