What is bankruptcy?
Bankruptcy is a legal procedure by which an individual or business can reorganize or discharge debts. It is an important legal right. The right to file bankruptcy was included by our Founding Fathers in reaction to the “debtor’s prisons” of colonial times, in which individuals could be imprisoned for their debts. Since the year 1800 this country has had formal bankruptcy laws for the benefit of U.S. residents. Read more on our Bankruptcy Facts page. Learn more from this video.
What can bankruptcy do for you?
Bankruptcy can eliminate some or all of your debts and provide a fresh start. A bankruptcy filing will stop collection efforts including IRS levies. It can also provide time to reinstate a mortgage or other loan and may permit you to remove a second mortgage from your home. Learn more from this video.
How do I file for bankruptcy?
A bankruptcy filing begins by filing a Petition, Schedules A through J, Statement of Financial Affairs and a few other documents with the Bankruptcy Court in your Federal District. You will be assigned a judge, and for Chapters 7 and 13, a trustee. For more information see our Bankruptcy Facts page. Our office can help you with this. Learn more on our YouTube Page.
Where can I find more information on filing bankruptcy?
A good place to start is our Bankruptcy Facts page. For more on a Chapter 7 liquidation see our Chapter 7 page. For more on a Chapter 13 wage earner reorganization see our Chapter 13 page. For more on a Chapter 11 reorganization for individuals and small businesses see our Chapter 11 page. If you are a creditor in a bankruptcy see our Creditors page and Bankruptcy Facts page. Please call our office with any questions. We do not charge for the initial consultation. Learn more on our YouTube Page.
How do I know if I qualify?
If you are in financial distress then you likely qualify for one of the available chapters in bankruptcy. Most people still qualify for Chapter 7. If you have significant income you may have to file under Chapter 13 in which you file a Plan and make payments for three to five years. If you have secured debt of over $1,000,000.00 or unsecured debt of over $360,000.00 you may only qualify for Chapter 11. There are some significant exceptions. Call us with your questions. Learn more on our YouTube Page.
What are the differences between chapters 7, 11 and 13?
The most commonly filed form of bankruptcy is Chapter 7. It is a simple liquidation and takes about four months. Chapters 11 and 13 both involve filing a plan and making payments for a number of years. Chapter 13 is much simpler but is limited to individuals with unsecured debt of no more than $360,475.00 and secured debt of no more than $1,081,400.00. Chapter 11 does not have these dollar limitations and is also available to business entities but is more complicated and expensive. Learn more on our YouTube Page.
How will filing bankruptcy affect my credit?
A bankruptcy filing will damage your credit score. The amount of reduction depends on your current score. A high score will drop more than a low score. The bankruptcy discharge will remain on your credit report for ten years. However, most people can rebuild their credit score in about two years. See our discussion on rebuilding your credit after bankruptcy. We can help you with this. Learn more on our YouTube Page.
Will my neighbors or co-workers be contacted?
No. A notice will be mailed by the Bankruptcy Court Clerk to your creditors and to parties to leases. In South Florida all legal proceedings are reported once in the Daily Business Review newspaper. It has been our experience that friends, family, neighbors and co-workers do not find out about a bankruptcy filing unless told by the debtor. Call us if we can help.
What will be required of me?
Means testing – Section 707(b) of the Bankruptcy Code provides for dismissal of Chapter 7 cases or (with the debtor’s consent) conversion to Chapter 13, upon a finding of abuse. Abuse is presumed if the debtor’s current monthly income, excluding allowed deductions for expenses, permit the debtor to pay not less than (a) 25% of non priority unsecured debt over 60 months or $10,000.00. Debtors whose family income exceeds a national median for their size family will have to go through “means testing”. Debtors with the ability to pay 25% or more of their unsecured debt will have to file a Plan under Chapter 13 and make payments for a minimum of 5 years. We will need your pay stubs or other proof of income for the six months prior to filing in order to complete your means test.
Credit Counseling – All debtors must undergo consumer credit counseling within 180 days of filing and may not obtain a discharge until they complete a personal financial management instructional course.
Additional Filing Requirements – Debtors will be required to provide copies of tax returns to the United States Trustee.
Can bankruptcy be denied?
On rare occasion a bankruptcy discharge may be denied as to one creditor if that creditor can prove that the debt was a result of fraud, embezzlement or breach of fiduciary duty. It is also possible for the entire discharge to be denied if the debtor does not cooperate completely with the Bankruptcy Court. We work carefully with our clients to make sure neither happens.
How does bankruptcy chapter 13 work?
A Chapter 13 Bankruptcy is a payment plan for wage earners. It allows you to reinstate a mortgage or car loan over time and to pay for certain assets that you want to retain. For more see our Chapter 13 page.
How does bankruptcy chapter 7 work?
A Chapter 7 Bankruptcy is a liquidation procedure. The Debtor is allowed to keep certain assets, including a home and a limited amount of personal property. The Chapter 7 Trustee liquidates any remaining assets and distributes the funds to creditors. It is the simplest and quickest form of bankruptcy. For more see our Chapter 7 page.
How does bankruptcy chapter 11 work?
A Chapter 11 Bankruptcy allows an individual or small business to reorganize, negotiate with creditors, and pay some or all of the debts over time. For more information see our Chapter 11 page.
Which bankruptcy clears all debt?
All forms of bankruptcy will lead to a bankruptcy discharge. The discharge, with a few rare exceptions, is the same in all chapters. See our Bankruptcy Facts page for more information on the bankruptcy discharge.
What happens after you file for bankruptcy and complete the process?
The end result of a bankruptcy is the receipt of a Bankruptcy Discharge from the Court. The Discharge eliminates most debts (but not family support or recent taxes) and prevents creditors from ever attempting to collect on the debt. For more information see our Bankruptcy Facts page.
When does filing for bankruptcy make sense?
Going to see a bankruptcy attorney is much like going to the dentist – most people wait too long. We provide a free consultation to see if a bankruptcy filing is right for you. As a general rule, a bankruptcy makes sense when your debts exceed your non-exempt assets (your home, 401k and limited personal property are exempt) and you can no longer keep up with the payments.
Will bankruptcy affect my partner?
No. In a bankruptcy filing we may have to disclose joint income and joint expenses in order to provide a fair assessment of your financial situation, but only your name and social security number are provided to the Court.
Can I file for bankruptcy without losing my home?
In almost all cases, Yes. In Florida your homestead is exempt from the actions of creditors. However, in Bankruptcy Court your exemption is limited for the first three and one-third years of ownership, so we will need to evaluate your particular situation. Once you have owned your home for more than 1215 days then it is completely exempt and you can keep your home in a bankruptcy.