Get Adobe Flash player

FREE Consultation

Name

E-mail

Telephone

Message

Need a call?  yes no
captcha copy:

Bankruptcy FAQs, Melbourne, Stuart, Palm City, FL

  1. What is a Chapter 11 & 12 bankruptcy?
    Chapter 11 is typically used for business bankruptcies and restructuring, but sometimes must be used by an individual if they don’t fit within the Chapter 13 requirements.. It is not commonly used by individual consumers since it is far more complex and expensive to pursue. Chapter 12 is reserved for farmers and commercial fishermen.
  2. Which is better, Chapter 7 or 13?
    The answer really depends on your individual financial situation. If they qualify, most individuals would prefer a Chapter 7 bankruptcy. This is because it is faster, and discharges most debt immediately without any additional payments. In Florida, about 75% of all consumer bankruptcy filings are under Chapter 7. On the other hand, a Chapter 13 plan offers an alternative if you have a steady income, a stable job, and want to pay off most or all of your debts.
  3. I have only lived in Florida for six months, can I file here?
    Yes, but since you have not lived here for the past two years, you must use the exemptions from the state where you previously lived. What you get to keep if based on the state law that relates to what creditors can take from you in a lawsuit or a bankruptcy. So, for example, if you lived in California and just moved to Florida, you could file here, but what you get to keep would depend upon the law in California.
  4. What causes most bankruptcies?
    While the most common cause of bankruptcy has traditionally been based on illness and medical expenses, many of today’s problems have been cause by the real estate crisis and unemployment related to the Great Recession.
  5. Do I have to list all my debts?
    Yes, you must list all of your debts on your bankruptcy schedules. This means all debts, and includes debts that are non-dischargeable or secured. You always have the right to voluntarily pay a creditor after a discharge, even though you are not legally liable for the debt. You also have the choice to reaffirm any debt after the filing.
  6. Will the bankruptcy trustee come to my house?
    This is extremely rare. Usually, no one will come to your home to examine your personal belongings. If a Trustee has a strong suspicion that you have hidden assets or undervalued what you own, it is possible.
  7. My wages are being garnished. Will bankruptcy stop the wage garnishment? Yes. Once your case is filed, creditors are no longer entitled to garnish your wages for debts that existed at the beginning of the case. The only exception may be for on-going child or family support ordered by a court.
  8. Is the IRS affected by my bankruptcy filing?
    The IRS must cease collection actions after a bankruptcy is filed, just like all other creditors. The automatic stay protects the debtor and the debtor’s property. Whether the tax claim is non-dis-chargeable depends on a number of factors. See the Florida Bankruptcy Guide for more details.
  9. Can I transfer my assets to someone else before filing?
    If you do that, your discharge will be denied. Such transfers are not effective to put your assets beyond the reach of creditors and bankruptcy trustees. A bankruptcy trustee can recover the assets, so don’t even try.
  10. Are there tax consequences for filing bankruptcy?
    Typically, for the average individual debtor, receiving a discharge in bankruptcy has no tax consequences. The Internal Revenue Code §108 excludes the discharge of debt in bankruptcy from its definition of cancellation of debt income.
  11. I received a Form 1099(c) for a debt that I had discharged in bankruptcy. What can I do?
    If you have received an IRS 1099(c) on a debt discharged in a bankruptcy case, you can file Form 982 to tell the IRS that the sum on the 1099 should be excluded from your income by reason of your bankruptcy.
  12. What about liens on my property?
    Although a debtor is relieved of personal liability for all debts that are discharged, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien. In other words, if you car is still under financing, the lender can repossess the vehicle.
  13. How would I know if Chapter 7 is right for my situation?
    If you have very few assets with no property and your assets can be exempted then Chapter 7 may be right for you as long as you have no other obligations such as court ordered alimony, child support payments, criminal restitution, non-dischargeable taxes, or student loans.
  14. Which bankruptcy chapter is the least expensive?
    Chapter 7 is the least expensive because you do not have to pay off the debts. The next least expensive is Chapter 13 where you repay about 10 cents on the dollar, followed by Chapter 11.
  15. Can I pick and choose which assets to put into a personal bankruptcy?
    No. Every asset you own must be included in the filing. After filing you may choose to exempt some of your assets.
  16. What does reaffirm mean? You become personally liable for the debt again. For instance, in the vehicle example above if you kept the car and made payments the creditor would probably want you to sign a new contract (reaffirm) for the vehicle.
  17. I own a small corporation, does my personal bankruptcy affect my corporation? No. But your shares go to the trustee and may restrict your voting and transferring privileges.
  18. Do I have to appear before a bankruptcy judge? No, you will meet with a trustee and possibly your creditors at a meeting called a 341 Meeting, which is named after the section of the law provision which outlines the meeting process..
  19. What if I want to keep some non-exempted assets? In most cases, you can buy them back from the trustee.
  20. If I change my mind after filing can I stop the bankruptcy? Only the judge will decide if it may be dismissed or not. Even if you get the case dismissed your credit report will still show that you filed.
  21. What does it mean when a trustee abandons property? When the liquidation value of an asset cannot pay off the secured creditors, the trustee “abandons” it, or simply gives it back to the debtor. Although you’ve been discharged from the obligation, if a workout can not be achieved or payments made, you’ll probably lose the property at a foreclosure.
  22. I thought bankruptcy stopped foreclosure? Can they still take my house? When you file Bankruptcy, you receive an “automatic stay” on court actions such as foreclosures and sheriff’s sales. A creditor can still go into court and ask the bankruptcy judge for a “relief from stay”, and if granted the creditor can proceed with court action to foreclose.
  23. Can I change from a Chapter 13 to a Chapter 7 or vice versa later? Yes, it’s called “motion to convert” and can be done after you’ve filed for either chapter, be advised that the trustee can also request a conversion. For instance, if your chapter 13 fails, either you or the creditor, may request a conversion to chapter 7. Likewise if the trustee thinks money might be available for unsecured creditors they may make a motion to convert your chapter 7 to a chapter 13.
  24. What if I run out of exemptions but still want to keep some items? After all exemptions have been exhausted, you may still be able to buy back from the trustee certain assets.
  25. I heard that I have to take some kind of course before filing, is that true? Under the new law passed in 2005, credit counseling is a mandatory requirement. You must complete the credit counseling course within 180 days of filing your bankruptcy petition. You must use a service that have been approved by the U.S. Trustee’s office.
  26. Are there two courses I have to take, or just one? After you file, and within 45 days after the first date set for your creditors meeting, you must complete a two hour course on financial management. When you complete the course, you must file a Form 23 with the bankruptcy court.
  27. What happens at a 341 Meeting?Soon after you file your petition, you will get a notice to appear for a creditors meeting. This will probably be the only time you will need to make an appearance. At this meeting, which is with the Trustee and any interested creditors, you will be sworn in and the Trustee will ask you questions about the petition and schedules that you have filed. Creditors also have the chance to ask questions, although frequently no creditors even appear at these meetings.
  28. Is it true that government fines can’t be discharged? The following fines and penalties cannot be discharged in bankruptcy:
    Fines for violating federal agency rules;
    Fines for violating federal election laws;
    Fines for contempt of court;
    Restitution to victims in a federal criminal case;
    Fines related to misdemeanors or felonies;
    Debts to a bail bond company for bond forfeiture;
    Any court fees or court ordered judgments related to criminal activity.
  29. I recently took some credit card cash advances, is that a problem? If you have received a total of over $825 of cash advances involving one creditor within the 70 day period before the filing of your bankruptcy, those debts are non-dischargeable.
  30. I just bought a big screen television on my credit card, is that a problem? If you have had recent purchases of luxury items on a credit card, and those charges exceed $550 in debt to one creditor within 90 days before you file, there is a presumption that your intent was fraudulent when you made those purchases. Luxury purchases means the purchase of luxury goods or services, and are not reasonably necessary for the support and maintenance of your family, including a big screen television.
  31. Do I need to be current in my income tax return filings? You must give your tax return to the Trustee at least seven days before the creditors meeting. If you don’t do that, you Petition will be dismissed. The best practice is to get you last two year’s tax returns to the Trustee as soon as he or she have been assigned to your case. You will get a notice telling you who your Trustee is, and then you should immediately send the tax return.
  32. Can anyone file a Chapter 7 bankruptcy? No, you must qualify. Which is done by passing the “Means Test.”
  33. What is the Means Test? The Means Test is a financial calculation designed to determine if you have the ability to pay back any part of your debt. It is a complex financial calculation using some of our expenses and line item expenses from various government sources, to determine if you can make some payments over time.
  34. What happens if I “fail” the Means Test? You would have to file for Chapter 13 bankruptcy, not Chapter 7
  35. I am embarrassed about having to file. Has anyone famous ever filed for bankruptcy? Don’t be embarrassed. You are in good company. Some famous people who have filed are film maker Francis Ford Coppola, singers Wayne Newton, Cindy Lauper, and Latoya Jackson, comedian Jackie Mason, actress Kim Basinger and many more who you would recognize. Walt Disney even put his first company into bankruptcy.
  36. I have heard that even some politicians have filed for bankruptcy, is that right? Yes. George McGovern, a former United States Senator from South Dakota, and a Presidential Candidate filed, as did J. Fife Symington the Governor of Arizona, while he was still in office.
  37. Who are the major participants in the bankruptcy process? The Debtor (you), the Creditors (those people owed money by you) and the Trustee. The Trustee is an official appointed by the bankruptcy court to manage your bankruptcy.
  38. What does the Trustee do? The Trustee’s job is to get as many assets as possible to sell so that funds can be given to your creditors, and the Trustee gets paid based on that amount. The more he gets from you, the more the creditors get and the more he gets paid.
  39. What is the Trustee looking for? The Trustee wants to know what assets you have, what assets are exempt, and what kind of transactions have taken place in the last year. In some cases, the Trustee may be able to reach back and “undo” some of those transactions if payments have been made to some creditors which are detrimental to other creditors. A Chapter 7 Trustee looks for unreported assets, and also assets that have been transferred within the year before the bankruptcy filing.
  40. What if I have transferred some of my assets before the bankruptcy? The Trustee can look at transfers up to 10 years if the asset was transferred to a relative. The Trustee will also look at any payments made to creditors in the 90 days before filing to see if there was any preferential treatment, in which case, the Trustee can get the payments back to add to the bankruptcy estate.
  41. How does the Trustee get paid for this work? The Trustee gets a flat fee of $60 for each Chapter 7 case, plus payments based on how much money he gets back for creditors. Out of the first $5,000, the Trustee gets 25%, or $1,250. If he gets another $45,000, he gets 10% of that, and if he gets more than $50,000 but $1,000,000 or less, he gets 5% of that amount, and if he collects over $1,000,000, he gets 3% of that amount.
  42. I don’t have any assets beyond my exempt assets, what happens? The majority of cases are referred to as “no asset” cases, which means there will be no assets available for distribution to creditors at the end of the Chapter 7 case.
  43. Is there a difference between the Trustee and the U.S. Trustee? The U.S. Trustee is different from the Trustee we are talking about above. The U.S. Trustee is part of the United States Department of Justice. The U.S. Trustee works with the FBI and other agencies to prevent bankruptcy fraud and abuse. They have a team of auditors and lawyers, and they oversee the process, including overseeing your Trustee. They do random audits, and look at cases to make sure there is no fraud involved.
  44. After I file, but before I get my discharge, can I sell any of my assets? When you file, your property comes under the control of the Trustee. You may not sell or otherwise transfer any of your property after you file your petition in bankruptcy without the approval and consent of the Trustee.
  45. Can I acquire any property after I file but before my discharge? In most cases, any property that you acquire AFTER you file your petition will not be under the control of the Trustee, just the property you own BEFORE you file your petition.
  46. Can I borrow money after I file but before I get my discharge? Yes, you are allowed to borrow money after you file, if you can get someone to lend you money after you file. Any debts you incur after you file will not be discharged.
  47. I recently got divorced. Can I discharge my alimony payments? No, you cannot discharge any alimony, child support, and any other debt that amounts to support or maintenance for your children or your ex-spouse.
  48. What about property taxes, are they dischargable? Property taxes are only dischargeable if they became due more than a year before you filed for bankruptcy. This is also somewhat misleading, because a discharge of your personal liability does not solve the problem. The property taxes are still a lien on the property and must be paid upon a transfer. If you don’t pay your property taxes in Florida, you can lose your property if someone else pays them and obtains a tax deed.
  49. I own a small business, and I owe payroll taxes. Am I individually liable, and can I discharge that liability? As the owner and personal who controls the finances of the company, you are personally liablie for payroll taxes. a. Payroll taxes can never to discharged.
  50. My house has been in foreclosure and I owe money to the homeowners association, since I am giving the house back to the bank, can I discharge the homeowners association fees? Any of these fees that arise AFTER the date of filing of your bankruptcy petition cannot be discharged. Those arising BEFORE you file are dischargeable. This means that if the foreclosure has not been completed and the property is still in your name, new fees could be your responsibility.
  51. Instead of just taking money out of my 401(k), I borrowed from the 401(k). Can I discharge that debt? Any money you borrowed from your 401(k) or other tax deferred plan cannot be discharged in Chapter 7 bankruptcy.
  52. My son was in a car accident and someone else was hurt and is now suing him. He was arrested for being intoxicated. Can he discharge this debt? Debts for personal injury to another person are not dischargeable in bankruptcy if you were intoxicated at the time. Debts for property damage arising from the same facts are different, you can discharge those debts.
  53. When I borrowed money to buy real estate, my income was misstated on the loan application. Can I still discharge this debt? A creditor can object to the discharge of a debt if they believe that you misstated your financial condition when you applied for the loan. The creditor would have to file an adversary proceeding, which is just a lawsuit within the bankruptcy. A bankruptcy judge would decide if you defrauded your lender.
  54. There is a lot of information need for the Schedules. Can I just file my petition and file the schedules later? Yes, but you only have 15 days to file the schedules after you file the petition, and if you don’t file them your case will be dismissed. That time runs faster than you can imagine, and there is a lot of detail and information that goes into the Schedules, and if you do not file them within that 15 days, your Petition will be dismissed.You don’t want your case dismissed for failing to take some required action or other reasons, because you can’t refile for 180 days, and when you do, your automatic stay is reduced to only 30 days.
  55. What happens if I finish the pre-filing credit counseling course but don’t complete the financial management course? You must complete the required personal financial management course within 45 days after your creditors meeting. If you don’t take the course, or you take the course and don’t file the certificate proving that you took the course, your Petition will be dismissed.
  56. Are there any exceptions to the Means Test? Yes, if you are a disabled veteran, and the debts you incurred happened while you were on active duty, you do not need to take the Means Test, and you automatically qualify for filing a Chapter 7 bankruptcy.
  57. Is that the only exception to the Means Test? The Means Test only applies if the majority of your debts are consumer debts. If more than 50% of your debts are a result of the failure of a business, the Means Test does not apply.
  58. I heard that I could be forced to file a Chapter 11 instead of a Chapter 13, why? If you fail the Means Test and think you will be required to file a Chapter 13, you need to look at the total amount of your debts. If you owe $336,000 in unsecured debt or $1,200,000 in secured debt, under 11 U.S.C. 104 and 109, you are not eligible for Chapter 13. If you are in that position, you need legal help, as you will probably be required to file under Chapter 11.
  59. If I pass the Means Test, does that guarantee that I qualify for Chapter 7? It is not a complete guarantee. It is possible that the U.S. Trustee, upon review of your file, could find what they call “general abuse.” General abuse is a result of the U.S. Trustee looking at your filing and after reviewing all of the circumstances of your case, taking the position that letting you discharge your debts under Chapter 7 would be an abuse of the bankruptcy laws.
  60. What would happen then? You could challenge the position of the U.S. Trustee, and let a bankruptcy judge decide. If the court were to find “abuse,” then you would face either a conversion of your filing to a Chapter 13, or dismissal of your bankruptcy filing.
  61. How could I challenge the U.S. Trustee? Under the law we all know that there is something called the “burden of proof.” There is a big distinction between presumptive abuse and general abuse when it comes to the burden of proof. If you fail the Means Test, you are presumed to have filed an abusive bankruptcy, and then the burden of proof is on you to establish that you are not abusing the system, and are actually entitled to use Chapter 7 to discharge your debts. The burden is on you, you must bring forward evidence of your right to use Chapter 7. With a claim against you of general abuse, the opposite is true. The party claiming that you are abusing the system (usually the U.S. Trustee) has the burden of proof to establish that you are not entitled to Chapter 7 protection.
  62. How often can you file for bankruptcy? Chapter 7: Can be filed every 8 years from a previous chapter 7 filing or 6 years from a prior chapter 13 filing. Chapter 13: Can be filed 4 years from a prior Chapter 7 filing or 2 years from a prior Chapter 13 filing.
  63. Will I lose my retirement accounts or payments from social security? Generally, no. Retirement accounts that are ERISA-qualified aren’t considered property of an estate and aren’t taken into consideration as assets. Social Security benefits are protected from assignment, or garnishment for debts in bankruptcy. Once paid, the benefits continue to be protected only as long as they can be identified as Social Security benefits. For example, money in a bank account where the “only” deposits into the account are direct deposits of Social Security benefits are identifiable and generally protected.
  64. How long does a bankruptcy stay on my record? Bankruptcies remain on credit reports anywhere from 7 up to 10 years.
  65. Can I do anything to remove a bankruptcy from my credit report? While you can’t do anything to remove it from your credit report, you can file an explanation with the credit reporting agencies briefly describing the events resulting in your bankruptcy. If an account is reported inaccurately, you can request the record be updated to reflect the actual situation.
  66. Can a creditor continue to contact me after I’ve filed for bankruptcy? Contacting you is a violation of the automatic stay provisions of the bankruptcy law. Once you file your bankruptcy petition, be sure to write down the case number that has been issued to you by the Clerk when your case was filed, and keep that number by your telephone, or in your pocket if you are getting calls on your cell phone. When a bill collector calls, tell them you have filed for bankruptcy, and give them the case number and the court (example: U.S. Bankruptcy Court, Southern District of Florida). If the same collector calls after you do that, contact your attorney if you are using one, or if you are filing yourself, contact the Better Business Bureau, the Florida Attorney General’s Office and your Trustee.
  67. Who will tell my creditors that I’ve filed for bankruptcy? The bankruptcy court notifies, by mail, all creditors advising them that you have filed for bankruptcy, gives them the case number, tells them about the automatic stay, gives the name of the Trustee assigned to your case, sets the date for the meeting of creditors, tells them the deadline set for filing objections to the dismissal of debts, and informs them whether and where to file claims.
  68. What’s a reaffirmation agreement? If you own secured property, ie: a car loan, a mortgage payment, then you have to tell the court what your intention is with regard to that property. You do this by filing a Statement of Intention. The form tells the court if you want to give the property back and get rid of the debt, which is called surrendering the property. Or, you could decide to keep the property and agree to pay the terms of the contract, which is called reaffirming the debt.

 Call Jon L. Martin Bankruptcy Attorney       Melbourne: 321- 541-1292 | Palm City: 772-419-0057

Jon L. Martin, Attorney at Law. All Rights Reserved | The information on this website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

Copyright © All Rights Reserved | Orange Snowman: Website Design West Palm Beach | Website Design Jupiter | Website Design Stuart