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Please Note: The information contained on this website regarding bankruptcy is intended as an overview and is not intended to be comprehensive. Further, it is for informational purposes only and is not to be considered legal advice. You should consult with an attorney for advice about your specific legal situation.
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Questions about Bankruptcy and the new Bankruptcy Rule
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What is Bankruptcy?
Bankruptcy is a federal court process designed to help consumers and businesses
eliminate their debts or repay them under the protection of the bankruptcy
court. Bankruptcies can generally be described as "liquidations" or
"reorganizations."
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What Bankruptcy can do?
If you are facing serious debt problems, bankruptcy may offer a powerful
remedy. Here are some of the things filing for bankruptcy can do:
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Wipe out credit card debt and other unsecured debts
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Stop creditor harassment and collection activities
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Eliminate certain kinds of liens (but not others)
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What Bankruptcy cannot do?
- Prevent a secured creditor from repossessing property
- Eliminate child support and alimony obligations
- Wipe out student loans, except in very limited circumstances
- Eliminate most tax debts
- Eliminate other non-dischargeable debts
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Should I File Bankruptcy?
There’s no magic formula for deciding when bankruptcy is the right choice. It’s
an option you might consider if you:
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Are paying only minimum amounts on your bills
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Can’t budget yourself out of debt within five years
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Are getting notices that your mortgage or loans are being foreclosed
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Have had a severe financial setback, such as losing your job or a major client,
a divorce or a costly illness
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What are the alternatives to
Bankruptcy?
Alternatives to bankruptcy include:
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Trying to negotiate with creditors to reduce monthly payments or to skip some
payments.
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Getting help from a nonprofit credit counseling group.
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What are the Consequences of filing
Bankruptcy?
A debtor may not be fired from a job because of filing for bankruptcy. However,
creditors may take a past bankruptcy into consideration when deciding whether
to extend credit. Many creditors regard a person who has filed for bankruptcy
to be a higher credit risk and may either refuse to extend credit or only
extend credit on less favorable terms. Bankruptcy filings remain on a
consumer’s credit report for seven to 10 years. It usually takes at least three
years to reestablish your credit rating.
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Do I need an attorney?
While it is possible to file a bankruptcy case pro se, i.e., without the
assistance of an attorney, it may be difficult to do so successfully. It is
recommended that a person considering bankruptcy consult with a competent
attorney prior to filing a case.
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Does my spouse have to file jointly with me?
If all or most of the debts are in your name only, your spouse may not have to file. Creditors usually cannot pursue a non-filing spouse, unless he or she is legally a co-debtor on the debt. Additionally, the bankruptcy should not be reflected on the non-filing spouse's credit report. The law does vary, however, from state to state so make sure you speak with a bankruptcy attorney about whether or not your spouse has to file.
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Who knows about my bankruptcy case?
The only parties that receive notice of the bankruptcy are your creditors, the bankruptcy court and the IRS. Generally, the bankruptcy will have no effect whatsoever on your taxes. Your employer will not be notified of the bankruptcy unless your employer is also a creditor. The bankruptcy is public record, so anyone who wants to find out could determine that you had filed. Generally, however, only you, your creditors and the IRS will know about the bankruptcy.
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What is Chapter 7 Bankruptcy?
Liquidation bankruptcy is called Chapter 7, and it can be filed by individuals
(a "consumer" Chapter 7 bankruptcy) or businesses (a "business" Chapter 7
bankruptcy). A Chapter 7 bankruptcy typically lasts three to six months.
In a liquidation bankruptcy, some of your property may be sold to pay down your
debt. In return, most or all of your unsecured debts (that is, debts for which
collateral has not been pledged) will be erased. You get to keep any property
that is classified as "exempt" under the state or federal laws available to you
(such as your clothes, car, and household furnishings). If you don't own much,
chances are that all of your property is exempt and you have what is known as a
"no asset" case.
If you owe money on a secured debt (for example, a car loan, where the car is
pledged as a guarantee of payment), you have a choice of allowing the creditor
to repossess the property; continuing your payments on the property under the
contract (if the lender agrees); or paying the creditor a lump sum amount equal
to the current replacement value of the property. Some types of secured debts
can be eliminated in Chapter 7 bankruptcy.
Chapter 7 bankruptcy may be right for you if you:
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Have no income or low income
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Have little or no money left after paying your necessary living expenses each
month
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Rent or have little equity in your home
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Have few assets (or no assets) outside your furniture, clothing and other
necessities
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What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is also known as "wage earner" bankruptcy because, in
order to file for Chapter 13, you must have a reliable source of income that
you can use to repay some portion of your debt. And to qualify for Chapter 13,
your secured debts must be less than $922,975 and your unsecured debts less
than $307,675.
When you file for Chapter 13 bankruptcy you propose a repayment plan that
details how you are going to pay back your debts over the next three to five
years. The minimum amount you'll have to repay depends on how much you earn,
how much you owe, and how much your unsecured creditors would have received if
you'd filed for Chapter 7.
If you have secured debts, Chapter 13 gives you an option to make up missed
payments to avoid repossession or foreclosure. You can include these past due
amounts in your repayment plan and make them up over time.
In addition to Chapter 13, there are two other types of reorganization
bankruptcy you may have heard of: Chapter 11 and Chapter 12. Chapter 11
bankruptcy is the type of bankruptcy used by financially struggling businesses.
It is also available to individuals, but because Chapter 11 bankruptcy is
expensive and time-consuming, it is typically used only by those who have debts
that exceed the Chapter 13 bankruptcy limits or who own substantial nonexempt
assets. Chapter 12 bankruptcy is almost identical to Chapter 13 bankruptcy. But
to be eligible for Chapter 12 bankruptcy, at least 80% of your debts must arise
from the operation of a family farm.
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Am I free to choose between Chapter 7
and Chapter 13?
If you meet the eligibility requirements for both, then you can choose which
type of bankruptcy makes the most sense for your situation. However, you may
not have a choice: If you have secured debts of more than $922,975 and
unsecured debts of more than $307,675, for example, then you cannot use Chapter
13.
Under the new bankruptcy law, filers whose incomes are higher than the median
income for a family of their size in their state may not be allowed to file for
Chapter 7 bankruptcy if their disposable income, after subtracting certain
allowed expenses and required debt payments, would allow them to pay back some
portion of the unsecured debt over a five-year repayment period.
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Which type of bankruptcy should I
use?
Most people who file for bankruptcy choose to use Chapter 7, if they meet the
eligibility requirements.
However, Chapter 13 might be a better choice, depending on your situation. For
example, if you are behind on your mortgage and want to keep your house, you
can include those arrearages in your Chapter 13 plan and repay them over time.
In Chapter 7, you would either have to make up the whole past due amount right
away -- and you might lose your house, if your equity exceeds the exemption
amount available to you.
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What property might I lose if I file
for bankruptcy?
You lose no property in Chapter 13, because you fund your repayment plan
through your income. In Chapter 7, you select property you are eligible to keep
from either a list of state exemptions or exemptions provided in the federal
Bankruptcy Code.
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What are the Florida State
Bankruptcy Excemption?
Exemptions are laws passed by every state that allow you to protect certain
types of your property from your creditors when you file bankruptcy-such as
your home, car, pensions and IRAs, motor vehicles, clothing, tools, and other
important property. Florida law provides a number of exemptions as listed below
that protect your property.
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Homestead: 160 acres of land and improvements
if located outside a municipality or ½ acre of land and improvements for a
residence located in a municipality. Also, 100 percent exemption for leased
dwelling place (including mobile homes).
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Wages: $500 per week
exemption for head of family (75 percent of weekly earnings for other
individuals).
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Automobiles: $1,000
exemption for one motor vehicle.
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Other Property: $1,000 exemption for any type of personal property and
100 percent exemption for hearing aids.
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What is Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005 (BAPCPA)?
The new bankruptcy reform law, known as the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (BAPCPA), went into effect on October 17. Among
key provisions are the new requirements that, for the first time, consumers
must participate in:
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Credit Counseling, individually or in a group briefing, provided by an
approved non-profit budget and credit counseling agency within 180 days prior
to filing for bankruptcy.
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Financial Education session ("pre-discharge debtor education") in order
to obtain a discharge from Chapter 7 or Chapter 13 bankruptcy.
Other changes to the bankruptcy law from Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 include:
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Means Test: If the debtor’s income is greater than the state
median income, they may not be eligible for Chapter 7.
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Homestead Exemption: A debtor may only exempt
up to $125,000 of interest in a homestead that was acquired within the
1,215-day period prior to the filing although the calculation of that amount
does not include any equity that has been rolled over during that period from
one house to another within the same state.
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Domestic Support Obligations: Domestic support obligations are
a first priority in distribution. Support owed to a former or current spouse or
child is given priority over support obligations that have been assigned or
owed directly to a governmental entity.
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Non-discharge of Student Loans: In addition to government
student loans, student loans to for profit and non-governmental agencies are
not dischargeable.
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Non-discharge of Recent Debt: Debts owed to a single creditor
totaling more than $500 for luxury goods incurred within 90 days of filing are
presumed non-dischargeable; cash advances of $750 within 70 days are also
non-dischargeable.
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Treatment of Auto Liens: Under Chapter 13 bankruptcy, where
the creditor holds a security interest in a motor vehicle purchased within 910
days of the filing, a secured creditor can retain their lien on a vehicle until
the payment of the entire debt, not just the secured portion.
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Time between bankruptcy filing: Chapter 7 debtors can file
only once every 8 years (was 6 years previously).
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Does the new law make it more
difficult to file for bankruptcy under Chapter 7?
Under the new bankruptcy law, as of October 17, 2005 bankruptcy applicants
who wish to file under Chapter 7 must meet certain eligibility requirements
under a "means test."
Under the "means test," if your current monthly income is less than the median
income in your state, you can file for bankruptcy under Chapter 7. But if your
current monthly income is above the median income in your state, and you can
afford to pay $100 per month toward paying off your debt, you cannot file under
Chapter 7 and must proceed under Chapter 13 (more on Chapter 13 in the next
section). Whether you can afford to pay $100 per month (or $6,000 over a
five-year period) is based on a formula that includes your monthly income, your
expenses, and the total amount of your debt.
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I want to file for bankruptcy, but I
have not paid taxes for the past few years. Can I still file?
Since the new law went into effect on October 17, 2005, people
wishing to file bankruptcy under Chapter 7 or Chapter 13 must now show proof of
their income by providing federal tax returns from the last tax year. If a
bankruptcy filer has not paid taxes for the previous tax year, he or she must
do so before the bankruptcy can proceed.
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Is it true that people who want to
file for bankruptcy now need to go through some type of credit counseling?
Yes. As of October 17, 2005, before filing for bankruptcy most applicants must
undergo credit counseling in a government-approved program. Also, after the
conclusion of bankruptcy proceedings, but before any debt can be discharged,
bankruptcy debtors must participate in a government-approved financial
management education program.
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If I file for bankruptcy, can my
landlord still evict me from my apartment?
People who file for bankruptcy are entitled to certain immediate protections
from certain legal actions -- part of what is called the "automatic stay"
effect of a bankruptcy filing, because many potential legal actions against the
filer are stopped (known as "stayed" in legal terms). But as
of October 17, 2005, when the new bankruptcy laws took effect, some of
these protections have been eliminated. One key change is that filing for
bankruptcy no longer delays or stops eviction actions.
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Pre-filing Bankruptcy Counseling Related Questions
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What is Pre-filing Bankruptcy Counseling Course about?
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How long is the course?
Although it varies case by case, it takes about 90 minutes on average to complete the course, which conforms to the EOUST (Executive Office for U.S. Trustees) program guidelines.
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How is the course offered?
The course is offered in-person, over the phone and on Internet. You can also register online for this course and one of our counselor will contact you. To start your course call us at 800-920-2262.
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Can joint bankruptcy filers take the course together?
Yes. Joint filers can attend the same counseling session together.
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Can another person purchase the course for me?
Yes, another person, such as your spouse or attorney, may purchase the course for you.
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How much does the course cost?
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When is the certificate of completion for the course available?
The certificate will be issued upon completion of the course when the completion of the course falls during regular operating hours; if the course is completed outside of regular operating hours, the certificate will be issued on the next business day.
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Who will receive the certificate of completion?
The certificate will be sent to the client. The client may also elect to send the certificate to his/her attorney. This election if offered during the registration process.
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How is a certificate of completion sent?
Certificates are sent by e-mail, fax or U.S. mail.
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Is Credit Card Management Services approved by the EOUST?
Yes, we are approved to offer our bankruptcy education course in Northen, Middle and Southern districts of Florida*. We are also under the process of getting certification for other states.
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What forms of payment do you accept?
Payments are accepted online. We accept major credit cards, debit card, money order, and ACH (electronic check).
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Pre-Discharge Debtor Education Related Questions
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What is Pre-discharge Debtor Education Course about?
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How long is the course?
Although it varies case by case, it takes about 2 hours on average to complete the course, which conforms to the EOUST (Executive Office for U.S. Trustees) program guidelines.
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How is the course offered?
The course is offered in-person, over the phone and on Internet. You can also register online for this course and one of our counselor will contact you. To start your course call us at 800-920-2262.
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Can joint bankruptcy filers take the course together?
No. Joint filers must each purchase the course and complete it separately.
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Can another person purchase the course for me?
Yes, another person, such as your spouse or attorney, may purchase the course for you.
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How much does the course cost?
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When is the certificate of completion for the course available?
The certificate will be issued upon completion of the course when the completion of the course falls during regular operating hours; if the course is completed outside of regular operating hours, the certificate will be issued on the next business day.
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Who will receive the certificate of completion?
The certificate will be sent to the debtor, the debtor’s attorney, the clerk of the court or the trustee. This preference is specified by the client during the online registration process.
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How is a certificate of completion sent?
Certificates are sent by e-mail, fax or U.S. mail.
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Is Credit Card Management Services approved by the EOUST?
Yes, we are approved to offer our bankruptcy education course in Northen, Middle and Southern districts of Florida*. We are also under the process of getting certification for other states.
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What forms of payment do you accept?
Payments are accepted online. We accept major credit cards, debit card, money order, and ACH (electronic check).
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Questions for Attorneys / Legal Firms
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