Bankruptcy
Bankruptcy the Basics
Bankruptcy; if you’re like most people in Florida, the word strikes fear in your whole body. You think bankruptcy is going to be the end of the world, and that everyone in Florida will know about your Chapter 7 or Chapter 13 filing.
Bankruptcy is public, but also very private.
In fact, though your case is public record there’s virtually no chance that anyone is going to find out about it unless you tell them. Someone would have to go to the court’s website, get a paid password for the system, and enter your social security number in order to get information about your case.
Not many people are going to take that kind of time.
Filing Chapter 7 bankruptcy may be a way for Florida consumers to wipe out various types of debts and start over, free of the hassle of constant creditor harassment.
Most people think of Chapter 7 bankruptcy when they think of getting out of debt, and that’s because it’s the most common way for people to end their bill problems and start over. Most people who file for Chapter 7 get to keep all of their property, but that’s because an experienced bankruptcy lawyer knows how Florida cases are handled – one of the hallmarks of a good lawyer is that they won’t let you file a Chapter 7 bankruptcy unless it’s right for you.
There are pros and cons to filing Chapter 7, and your lawyer can review these with you in order to help you make an informed decision as to whether you should file.
Filing bankruptcy shouldn't be an exciting process. Nobody likes to think about topics like creditor harassment, home foreclosure, car repossession, lawsuits, wage garnishments and judgment liens. At the GM Law Firm in Orlando, Florida, we think filing bankruptcy should be boring and predictable, and our lawyers will work hard to keep it that way.
The Bankruptcy Process
1. Preparing for Bankruptcy
If you plan on filing for bankruptcy, you must first identify all sources of income, real estate property, any major financial transactions you've undertaken in the last two years, and itemize your monthly living expenses. Additionally, you will be required to disclose all assets and all secured and unsecured debt you have. This includes car loans, student loans, medical bills, credit card debt, and so on.
2. Chapter 7 Bankruptcy Filing
In order to file for Chapter 7 bankruptcy, you must submit a two-page petition in the federal bankruptcy court as well as several schedules which list all of your assets and all of your debts. When you file, you can list all property you believe is exempt from liquidation. The information you provide throughout your bankruptcy petition and schedules must be accurate and you are required to sign, under penalty of perjury, that it is. Your documents will be reviewed by a judge, your creditors, the Chapter 7 Trustee assigned to your case and the US Trustee's office. Typically, filing your petition costs around $299 (though this may be waived in certain situations).
3. Chapter 13 Bankruptcy Filing
In Chapter 13 bankruptcy, you must additionally submit a debt repayment plan for consideration by the court that includes all payments to secured creditors and any amount to be given to the unsecured creditors. Consequently, you must calculate how much disposable monthly income you have after paying for living expenses and other bills. Your proposed repayment plan should reassure unsecured debt creditors that they will receive as much under your proposed Chapter 13 plan as if you had filed for Chapter 7 bankruptcy. You will be required to pay only a portion of what you owe to unsecured creditors over a 3 to 5 year period. It costs $275 to file for Chapter 13. If your repayment plan is accepted, you make your plan payments to the Chapter 13 bankruptcy trustee. The trustee is responsible for dispersing funds to creditors.
4. The 341 Meeting - Talking with Your Creditors
A month or so after you file for bankruptcy; you will be required to attend a meeting with your assigned Trustee and possibly your creditors. Referred to as the "341 meeting" after the bankruptcy code that mandates it, you will be placed under oath so the Trustee and your creditors can ask you questions. Although creditors usually don't appear, we accompany our clients to their 341 meeting to represent them during their testimony with both the Trustee and any creditors who may attend.
5. Approval of Your Bankruptcy Petition
For Chapter 7 Bankruptcy, once the Trustee indicates that your bankruptcy estate has been fully administered and there are no other objections on file, the court will approve the discharge of your unsecured debt of your unsecured debt. Under Chapter 13, your debt repayment plan will go into effect and you will be expected to adhere to its payment schedule. Once you have successfully completed your payment plan, you will, in most instances, receive notice that any remaining unsecured debt has been discharged.
The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and experience.
Differences between Chapter 7 and Chapter 13.
The differences between Chapter 7 and Chapter 13 bankruptcy begin with a means test. In order to file under Chapter 7, your family income cannot exceed the Florida median income for families of a similar size. If you qualify for Chapter 7 bankruptcy, you can discharge unpaid credit cards, medical bills, certain kinds of loans, and other forms of unsecured debt.
If your income is too high, you can file for bankruptcy under Chapter 13. Under Chapter 13, your debt will be restructured in order to allow you to pay off a percentage of what you owe over a 3 or 5 year period. In both instances, once the court approves your bankruptcy plan, there is very little creditors can do to force you to pay late fees, fines, or harass you as long as you stay current in your payments to the trustee.
Personal Property - Chapter 7 and Chapter 13 Bankruptcy
Another important difference between Chapter 7 and Chapter 13 bankruptcy is how certain items of personal property are handled. In Chapter 7 bankruptcy, the court can seize and liquidate some of your personal property in order to pay your creditors a portion - or all - of what you owe them. Typically, luxury items like plasma screen TVs, expensive appliances, high-end electronic equipment, or expensive cars are targeted. In Chapter 13 bankruptcy, since you are required to pay a portion of your debt through a repayment plan, you may be able to avoid having your property seized or liquidate
Who Can File Bankruptcy in Florida
A permanent resident of Florida can file bankruptcy in a Florida bankruptcy court. Florida has three bankruptcy districts (Southern District, Middle District, and Northern District), and each of Florida’s counties is assigned to one of the three bankruptcy districts. You must file bankruptcy in the district of your residence. We represent bankruptcy debtors only in the Middle District of Florida which includes many counties along the I-4 corridor (Daytona Beach to Tampa) and I-95 from Brevard County to Jacksonville.
An important concept in Chapter 7 and Chapter 13 bankruptcy is “exemptions” or “exempt property.” When you file a Chapter 7 bankruptcy, the Trustee takes all of your “non-exempt” property and sells it for the benefit of your unsecured creditors. The Trustee cannot take your exempt property and you may keep all of your exempt property regardless of its value and amount. What property is “exempt” and what property is “non-exempt” depends on the laws of the applicable state. Each state has its unique laws about what assets are exempt and non-exempt for bankruptcy purposes. Therefore, before you file bankruptcy you and your bankruptcy attorney must ascertain which state laws will determine your exempt assets.
Florida has liberal bankruptcy exemptions, including an unlimited homestead exemption. Only Florida residents (who meet residency requirements) are eligible for Florida exemptions. Just because you are a Florida resident when you file for bankruptcy does not mean you are entitled to Florida exemptions in bankruptcy.
Under the new bankruptcy law the state exemption law applicable to your bankruptcy is determined by the state in which you have been domiciled for the 730 days (two years) immediately preceding your filing date. If you have not been a permanent resident of Florida for the two-year period immediately preceding your bankruptcy, then your bankruptcy exemptions will be those allowed by the state in which you were domiciled for 180 days immediately preceding the two-year period, or the state in which you were domiciled for the longer portion of such 180-day period.
Otherwise stated, a person filing bankruptcy in Florida today is eligible for the property exemptions he could have claimed if he had filed bankruptcy two years ago. If this person was a Florida resident two years ago, he claims Florida exemptions today; if two years ago he was a resident of a different state then he is entitled to the exemptions of the state of his prior residence.
Planning for Bankruptcy
Not all people and companies facing overwhelming debt can immediately file for bankruptcy protection. Occasionally some planning is required. Taking advantage of available property exemptions and protections is not improper if handled in an appropriate way. Our office can guide you through this difficult process.
One key factor for an individual to consider is the homestead protection. Most states offer some form of homestead protection from creditors (not to be confused with the homestead real estate tax exemption offered in many states). Florida is one of a hand full of states that offer an unlimited homestead exemption. That is often a focal point of bankruptcy planning. For more information on exempt assets see our page on Asset Protection.
Other factors to consider before filing for bankruptcy filing include payments to creditors, particularly family and business associates. Payments to general creditors within 90 days of filing for bankruptcy protection may be considered preferential and may be taken back from the creditor and redistributed to all creditors. The 'preference period' for insiders (family, business associates, partners, etc.) is one year. Inadvertent preference payments may justify a delay in filing.
Planning and Bankruptcy Reform
Bankruptcy planning has changed as a result of the new bankruptcy reform laws. Responsible planning should be conducted with an eye towards the effect of these new laws. With appropriate planning most people can still file for bankruptcy protection.
One aspect of the new legislation limits the homestead exemption. Five states (including Florida) now offer their residents an unlimited homestead exemption. This has lead to numerous abuses. Many people facing large money judgments have moved to states like Florida, purchased a home with their available funds, waited an appropriate time period (usually one year) and filed for bankruptcy. Several provisions of the new bankruptcy laws were designed to limit this form of planning.
One new provision limits the homestead protection available in bankruptcy if the Debtor has not owned his or her home for a period of 1215 days. This may dramatically increase the time period some individuals must wait before filing. A second provision prevents a debtor in bankruptcy from claiming as exempt any equity fraudulently transferred into the home within the past ten years. This may lead to an unusual situation where an individual's home may be protected from creditors as long as the debtor steers clear of bankruptcy for the ten year period. Bankruptcy planning must then take into consideration the possibility that a creditor may file an involuntary bankruptcy. Competent planning must take into consideration all of these factors and many others. Call us for a free initial consultation to see if bankruptcy planning may benefit you.
Bankruptcy Exemptions in Florida
Understanding and claiming exemptions can be complicated. If you are considering filing for bankruptcy, consulting with an experienced bankruptcy lawyer can greatly assist you in preparing your bankruptcy petition and avoiding mistakes. While not an exhaustive list, the following represents some of the exemptions that can be claimed:
- Constitutional Homestead exemption
- 401k Savings
- Pension plans
- Prepaid school tuition
- Worker's compensation
- Social Security benefits
- Supplemental Security Income
Will I Lose My Car?
Orlando, Florida Reaffirmation Agreement Attorney
While every case is different, it is possible to keep your car if you file for bankruptcy under the terms of either Chapter 7 or Chapter 13. If you file for bankruptcy under Chapter 7, with few exceptions your unsecured debt will be discharged. However, the court may liquidate a portion of your personal property in order to pay back some or all of what your owe creditors. Your car is considered personal property and may be subject to administration by the Bankruptcy Trustee for the benefit of the insecure creditors. Whether or not your car is forfeited as a result of the bankruptcy process will depend on whether you have any equity in the car (difference in value minus what you owe on it), what exemptions are available to you under the Bankruptcy Code, and if you can continue making scheduled payments on your car.
There is a greater chance you will be able to keep your car if you file for bankruptcy under the terms of Chapter 13. Since Chapter 13 reorganizes your debt, past due and subsequent regular car payments can be integrated into your repayment plan. Again, assuming you can continue making regular car payments and your car is not considered a luxury item, you should be able to keep your car.
