Questions & Answers
How long does a bankruptcy stay on my record?
Bankruptcies can remain on your records anywhere from seven to 10 years. Chapter 7, Chapter 11 and nondischarged Chapter 13 bankruptcies remain on your record for 10 years. A discharged Chapter 13 bankruptcy will most likely remain on your record for seven years.
How long do I have to live in Florida before I can file for bankruptcy here?
If you have spent the majority of the past 180 days in Florida, you can file for bankruptcy here. Although bankruptcy law is federal, you are only entitled to the exemptions where you previously resided if you have not lived in Florida for the last two years. The exemptions you are allowed to use may seriously affect the property you will be allowed to keep.
Can bankruptcy stop my wages from being garnished?
Yes, bankruptcy can stop wage garnishment. Once you file for bankruptcy, an automatic stay prohibits creditors from garnishing your wages. This stay may be lifted for creditors with a valid reason and does not apply to domestic support obligations, including child support and alimony.
What is the difference between a Chapter 11 and a Chapter 13 bankruptcy?
Originally intended for big business, Chapter 11 bankruptcy allows companies and individuals to file for bankruptcy without a cap on the amount of money they owe. Chapter 11 bankruptcy allows individuals to restructure their company through reorganization. Unlike Chapter 11 bankruptcy, Chapter 12 bankruptcy is only available to family farmers with at least 50% of their debt being work-related and family fishermen with at least 80% of their debt being work-related.
What causes people to file for bankruptcy?
The Great Recession has caused a higher unemployment rate. When people lose their jobs, they are often unable to pay their bills. Facing rising debt that they are unable to pay, they turn to bankruptcy. The real estate crisis has also caused affected many individual’s financial situation. Medical bankruptcy accounted for 62.1% of all bankruptcies in 2007, according to a study by Harvard Law School. Divorce, excessive use of credit and unexpected expenses were also common causes.
Do I have to include all of my debts on my schedules?
Bankruptcy schedules give the court a better understanding of your financial matters, and it is mandatory to include all of your debts on your bankruptcy schedules. These debts include nondischargeable and secured debts. Even though you are not legally required to do so, you can voluntarily pay a creditor after a discharge.
Will a trustee come to my home?
Unless a trustee believes you are hiding assets or undervaluing your property, they will generally not come to your home. You are legally required to tell the truth under oath, and lying can lead to serious penalties.
Will bankruptcy stop the IRS from collecting?
When you file bankruptcy, the automatic stay prevents the IRS from collecting like it does for any other creditor. Whether you will eventually have to pay the IRS depends on whether you receive a dismissal or discharge from the court. If you receive a discharge, the IRS cannot continue to pursue collection. For more information, read the Florida Bankruptcy Guide or consult our Palm City bankruptcy attorney.
Can I pass down my property to my children before filing for bankruptcy?
If you transfer your assets, you will be denied a discharge by the Florida courts. Even if you give property to another person, the creditors and bankruptcy trustees can still recover the assets.
When is it beneficial to file Chapter 7 bankruptcy?
Because Chapter 7 is liquidation bankruptcy, it requires that your property is sold to pay down your debt. If you have no property and only exempt assets, it may be beneficial to file Chapter 7. To learn more about exempt assets in the state of Florida, read The Homestead Exemption and The Motor Vehicle Exemption. If you are liable for alimony, child support, criminal restitution, non-dischargeable taxes or student loans, filing Chapter 7 bankruptcy may not be in your best interests.
Which type of bankruptcy is the least expensive to file?
Because you do not have to pay off the debts, Chapter 7 is the simplest and least expensive type of bankruptcy to file. Chapter 13 only requires you to pay about 10 cents on the dollar, and is the second cheapest to file. Chapter 11, which is generally used by large corporations, is the most expensive type of bankruptcy to file.
Can I select what assets I want to put into a personal bankruptcy?
No, you are required to place all of your assets into the filing. You can choose to exempt some of your assets, however, after you file.
If I file bankruptcy, do I have to go to bankruptcy court and appear before a judge?
No, you will not have to appear before a bankruptcy judge. You will have to attend a 341 Personal Bankruptcy Meeting where a bankruptcy trustee will ask you questions about your financial situation.
Can I keep some of my nonexempt assets?
Most of the time it is possible to buy your nonexempt assets back from the trustee. In addition to the possibility of purchasing the property for its current full value, you may also be able to exchange your exempt assets to keep nonexempt ones.
Can I stop a bankruptcy if I have already filed?
Whether you can stop the bankruptcy depends on the judge’s decision to dismiss the case. It is important to note that your report will still show that you filed, even if your case is dismissed.
Can I lose my house after I file bankruptcy?
If a judge grants a creditor a “relief from stay”, the creditor will be able to proceed with a foreclosure on your house.
If I filed for a Chapter 13 bankruptcy, can I change it to a Chapter 7 bankruptcy? If I file for a Chapter 7 bankruptcy, can I switch it to a Chapter 13 bankruptcy?
Yes, you can change the type of bankruptcy you would like by filing a “motion to convert”. If your request for a Chapter 13 bankruptcy fails, you can request a conversion to Chapter 7. Additionally, you can convert a Chapter 7 bankruptcy to a Chapter 13 bankruptcy if your trustee believes that there is money for unsecured creditors.
If I run out of exemptions, can I still keep some items?
You can still purchase some of your items back after you have used all of the exemptions.
Do I have to complete a class before filing for bankruptcy?
A mandatory credit counseling must be completed within 180 days of filing your bankruptcy petition. The service you use must be approved by the U.S. Trustee’s office.
How many courses do I have to take?
You are required to complete a two-hour financial management class within 45 days after the first date of your creditors meeting. After completing the course, you will need to file a Form 23 with the bankruptcy court.
What is a 341 Meeting?
A 341 Personal Bankruptcy Meeting allows a bankruptcy trustee and your creditors to ask you questions about your financial situation. Although your creditors can ask you questions, they will most likely not attend the meeting. Additionally, it may be in your best interests to have a Palm City bankruptcy lawyer advise you on how to best answer difficult financial questions, particularly those involving the transfer and sale of property.
Will I have to pay back credit card cash advances?
Debts related to credit card cash advances may be nondischargeable. If you took out more than $825 in cash advances from a single creditor within 70 days prior to filing bankruptcy, the charges will not be eliminated through bankruptcy.
I purchased a big screen TV with my credit card. What will happen to my bankruptcy?
Your purchases may be reviewed for fraud if you purchased over $550 on a credit card from one creditor within 90 days prior to filing. Luxury purchases refer to goods or services that are not necessary, such as a large television.
How do I qualify for Chapter 7 bankruptcy? What is the means test?
You qualify for Chapter 7 bankruptcy by passing the means test. The means test is a calculation that takes into account your financial situation as well as expenses from various government sources to determine if you will be able to pay back any part of your debt.
What happens if I do not pass the means test?
If you do not pass the means test, you will not be eligible for Chapter 7 bankruptcy. Because Chapter 13 bankruptcy does not require you have assets, you may still be eligible to file Chapter 13 bankruptcy with your income.
What are the trustee’s responsibilities?
The trustee is responsible for obtaining as many of your assets as possible so he or she can pay your creditors through the sale of those assets. Additionally, the trustee is paid based on the sale of your assets.
What is the trustee looking for?
Your bankruptcy trustee wants to know about your exempt assets, nonexempt assets and the sales, purchases and other transactions from the prior year. If certain transactions made to creditors were detrimental to others, he may be able to “undo” them. If you filed for Chapter 7 bankruptcy, your bankruptcy trustee will look for unreported assets and assets that have been transferred recently.
How are trustees paid?
Trustees are paid $60 for each Chapter 7 case they work and receive payments based on the money they pay creditors. They receive 25% of the first $5,000 and 10% of the next $45,000. If they get back more than $50,000 but $1,000,000 or less, then they receive 5% of that amount. Trustees receive 3% of amounts over $1,000,000.
What if I transferred my assets before filing?
If you transferred property to a family member within the past 10 years, your trustee can review it. If the trustee believes you gave preferential treatment to one creditor over another in the past 90 days, he or she can revoke the payments and return the funds to the bankruptcy estate.
What happens if I don’t have any assets except for exempt assets?
Most cases are “no asset” cases, which means that there are no assets available for creditors.
Can I sell my property after I file for bankruptcy and before I receive my discharge?
No, you cannot sell or transfer property after you file for bankruptcy without the consent of your trustee.
After I file, what happens to the property I acquire before my discharge?
Generally, only property you acquire before you file is under the control of the trustee. If you acquire property after you file, you will be in control of it, in most cases.
Can I discharge alimony payments from my recent divorce?
No, support and maintenance for your children and ex-spouse, including alimony and child support, cannot be discharged.
Can I discharge my property taxes?
If your taxes were due over a year before you filed, you may be able to discharge your property taxes. Even if they are discharged, the taxes are still a lien on the property and must be paid if you sell or transfer the property. If another person obtains a tax deed and pays your property taxes, you may lose your home in the state of Florida. Discharging property taxes is a confusing matter, but a Palm City probate attorney at Jon L. Martin, Attorney at Law, can explain your legal options to you.
I am a small-business owner, and I owe payroll taxes. Am I personally liable? Can I discharge that liability? As a small-business owner who has control over the company’s financial matters, you are individually liable for payroll taxes. You cannot discharge the liability for payroll taxes.
I am giving my house, which is in foreclosure, to the bank. Can I discharge the homeowner association fees?
You may be able to discharge fees that arise before you file for bankruptcy, but you are responsible for fees that arise after you file.
I borrowed from my 401(k). Can I discharge that debt?
No, you cannot discharge money you borrowed from your 401(k) or any other tax deferred plan with a Chapter 7 bankruptcy.
My son was driving while intoxicated and injured someone else, who is now suing him, in a car accident. Can he discharge this debt?
No, you cannot discharge debts for personal injury if you were intoxicated when it occurred. You are able to discharge debts from property damage claims, regardless of whether you were intoxicated when they occurred.
My income was misstated on the loan application to borrow money for real estate. Can I discharge this debt?
If they believe that you wrote incorrect your financial information when you applied for a loan, creditors can object to the discharge of the debt by filing an adversary proceeding. An adversary proceeding is a lawsuit within bankruptcy that would allow your judge to determine if you are guilty of defrauding your lender.
What are the exceptions to the means test for Chapter 7 bankruptcy?
Disabled veterans who incurred their debts while on active duty automatically qualify for Chapter 7 without having to take a means test. Additionally, if a majority of your debts are due to a business failure, the means test doesn’t apply.
Why would I have to be forced to file Chapter 11 bankruptcy instead of Chapter 13?
If you are unable to pass the means test and cannot qualify for Chapter 7 bankruptcy, you may be considered Chapter 13 bankruptcy. Chapter 13 bankruptcy has debt ceilings, however, and you will need to review your debts and assets. If you owe $383,175 in unsecured debt and $1,149,525 in secured debt, you may need to file Chapter 11 bankruptcy. If you are required to file Chapter 11, you should consult our Palm City bankruptcy attorney as soon as possible.
Does passing the means test automatically make me eligible for Chapter 7?
No, you are not guaranteed to qualify by passing the means test. If the U.S. Trustee finds substantial abuse when reviewing your files, you may become ineligible for Chapter 7. A U.S. Trustee may find substantial abuse when he or she believes that allowing you to discharge your debts with this type of bankruptcy would be an abuse of bankruptcy laws.
What can I do if the U.S. Trustee finds substantial abuse?
If the U.S. Trustee finds substantial abuse, you can challenge his or her position in front of a judge. If the bankruptcy judge were to find substantial abuse, either your filing will be dismissed or you will need to file a Chapter 13 bankruptcy.
How do I challenge a U.S. Trustee?
If you fail the means test, the burden of proof falls on you to show that you are not abusing the system. You can show that you are eligible for Chapter 7 bankruptcy by demonstrating that you have the proper assets to pay back creditors. With a claim of substantial abuse, the U.S. Trustee must show that you are abusing bankruptcy law and are not entitled to use Chapter 7.
How often can I file for bankruptcy?
How often you can file for bankruptcy depends on the type of bankruptcy you have filed in the past and the type you intend to file. Chapter 7 can be filed eight years from a Chapter 7 filing and six years after a Chapter 13 filing. Chapter 13 can be filed four years after a Chapter 7 filing and two years after a Chapter 13 filing.
If I file for bankruptcy, will I lose my retirement accounts or Social Security payments?
No, in most cases you will not lose either. ERISA-qualified retirement accounts are not considered assets, and Social Security payments are protected from being used to pay debts in bankruptcy. After you receive your benefits, it is important to keep them in a separate bank account where they are identifiable. This may help protect them against being used to pay creditors back.
Can I remove or expedite the process of removal of a bankruptcy from my credit report?
No, there is nothing you can do to remove a bankruptcy. You can explain why you filed bankruptcy to the credit reporting agencies. If an account is inaccurate, you are also allowed to request that your record is corrected.
I filed for bankruptcy, and creditors are still calling me. What should I do?
Because you have an automatic stay, creditors cannot continue to contact you. When bill collectors call you, explain to them that you have filed for bankruptcy. It may also be beneficial to provide them with the case number that was issued to you by the clerk and the Florida court that is overseeing your case. You can contact a Palm City bankruptcy attorney, the Better Business Bureau, the Florida Attorney General’s Office of your Trustee, if the same bill collector continues to contact you.
Will my creditors be notified once I have filed for bankruptcy?
Yes, your creditors will be notified by the bankruptcy court. They will be provided with your case number, information about your automatic stay, the name of your trustee, the meeting of creditors, and the deadline for filing objections to the dismissal of debts. Additionally, it tells them if they should file claims and where to file them.
I am embarrassed about filing bankruptcy. Has anyone famous filed?
You should not feel embarrassed about filing for bankruptcy because it may afford you the opportunity to solve your financial problems. Millions of people file bankruptcy, including famous people. Walt Disney, Francis Ford Coppola, Burt Reynolds, P.T. Barnum, Cindy Lauper, Kim Basinger and many other recognizable individuals have had to file.
Is it true that even politicians file for bankruptcy?
From Abraham Lincoln to United States Senator George McGovern, many politicians have filed for bankruptcy. Additionally, J. Fife Symington filed for bankruptcy while he was still the governor of Arizona.