Bankruptcy

Declaring bankruptcy is a very difficult decision that is usually must be made during an exceedingly stressful point in life. However, this decision doesn’t HAVE to be difficult! If you’re fully aware of your options and the path that a bankruptcy proceeding will take, this could actually be one of the easiest decisions you’v ever made. In fact, for many people the decision to file bankruptcy and the “automatic stay” it provides is a great relief.

The two main types of bankruptcy that we deal with here at the Preston Law Firm are Chapter 7 and Chapter 13 bankruptcies. They are differentiated by chapter number because the number corresponds to the chapter of the Bankruptcy Code in which they are found.

We here at The Preston Law Firm have extensive experience working with the U.S. District Court for the Middle District of Florida and its officers. Contact us today for a free consultation to see if Bankruptcy is the right decision for you.

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Descriptions & FAQ's

Chapter 7 Bankruptcy

Chapter 7 is the most common form of bankruptcy relief available to consumer debtors. Chapter 7 is a liquidation. This means that when you file your bankruptcy case, an estate is created. This estate consists of everything you own and every interest you may have, wherever located. A Trustee is randomly assigned to your case and their job is to locate assets of your estate and liquidate them to cash in order to pay your creditors at least some of what you owe.

You are allowed to exempt certain property from your estate. The exemption most familiar to Floridians is the homestead exemption. In Florida, under bankruptcy law, your homestead is exempt from your bankruptcy estate in most instances. While protection for your home is quite strong, protection for your personal property is rather meager in Florida. In general you are allowed to exempt $1,000.00 value in any personal property, $1,000.00 equity in one vehicle, some wages of head of household and most retirement income. There are other exemptions available depending upon the uniqueness of each case. Spouses who file together may each take the exemption for up to twice the value.

People who not have a homestead may take advantage of an additional exemption of $4,000.00 is any personal property. Spouses who file together may each take this exemption.

There is also an income requirement resulting in a means test qualification for consumer debtors. People who do not meet the requirement of the means test may not file Chapter 7. Chapter 13, however, may be available to them.

Most people who file Chapter 7 have few assets outside the home and average to below average income.

Prior to filing, debtors are required to take a credit counseling course (usually offered online or by telephone).

After filing, the debtors are required to take a second course in personal finance management (again usually online or by telephone).

You will be required to meet with the Trustee assigned to your case. They will ask a series of questions to help determine if there are assets available for creditors. You are under oath when meeting the Trustee.

If you have secured creditors (mortgage, car payment, etc.) and you are current in your payments to them, you will be given the opportunity to continue to make payments and keep property after the bankruptcy. If you are behind in payments to secured creditors, Chapter 7 will not protect you from losing the property to foreclosure or repossession.

Some debts will not discharge under Chapter 7. Most student loans, most taxes and any domestic support obligation will not discharge and you will be required to pay those debts.

Providing all the information requested and cooperating with your attorney and trustee will result in you receiving a discharge (meaning you no longer owe) of your debts, known as the fresh start, and move forward with your life.

Chapter 13 Bankruptcy

While not as common as a Chapter 7, a Chapter 13 bankruptcy may be very advantageous to some individuals based on their circumstances. Chapter 13 is bankruptcy relief provided to individuals with regular income. Chapter 13 is reorganization. This means that when you file your bankruptcy case, an estate is created. This estate consists of everything you own and every interest you may have, wherever located. A Trustee is assigned to your case and their job is to determine the value of assets of your estate, collect and distribute money from your future disposable income to your creditors.

You are allowed to exempt certain property from your estate. The exemptions available to Chapter 13 debtors are identical to the exemptions in Chapter 7. But instead of liquidating assets, you keep your assets and you pay the value of your assets that you cannot exempt to your creditors over 3 to 5 years.

Chapter 13 also provides protections not available in Chapter 7. You can make up payments to secured creditors, such as vehicles and mortgages. You can pay IRS debts over time. You may be able to strip away second mortgages to your home if they hold no equity.

Chapter 13 is an excellent way to pay the equity in your property over time rather than to surrender them in a Chapter 7.

You and your attorney will draw up a budget. This budget will be incorporated into a Chapter 13 Plan. The Chapter 13 Plan shows the Court how you plan to reorganize, pay or surrender any secured debts, and pay an amount from your future income to your unsecured creditors at least equal to any amount that would be liquidated to a Chapter 7 Trustee.

Prior to filing, debtors are required to take a credit counseling course (usually offered online or by telephone).

After filing, the debtors are required to take a second course in personal finance management (again usually online or by telephone).

You will be required to meet with the Trustee assigned to your case. They will ask a series of questions to help determine if there are assets available for creditors. You are under oath when meeting the Trustee.

There are limitations to the amount of debt you owe that may render you not eligible for Chapter 13. Most people fall well below said limitations.

There are debts that discharge under Chapter 13 that do not under Chapter 7.

Providing all the information requested and cooperating with your attorney and trustee will result in you receiving a discharge (meaning you no longer owe) of your debts, known as the fresh start, and move forward with your life.

Can I keep my home?

Usually! The equity in your home, wherein you reside, is protected from bankruptcy liquidation in most cases. It is not, however, protected from your mortgage company. If you are behind in payments to your mortgage, Chapter 7 liquidation will not save your home. Chapter 13 reorganization can help you save your home if you are behind. There are also residency and other factors that could limit the amount of home equity you could protect. Each case is different. Consult with an attorney experienced in bankruptcy law.

Can I keep my car?

It depends. You are not allowed to just keep a car. You may only exempt $1,000.00 value in one vehicle from bankruptcy liquidation. There may also be additional amounts available to you to protect your vehicle. Some vehicles have little or no equity, usually because more money is owed than there is value in the vehicle. If you are making payments to the vehicle, you may enter into a reaffirmation agreement with the lender to keep the vehicle. Each case is different. Do not rely on what your neighbor tells you. Consult with an attorney experienced in bankruptcy law.

Can I keep rental property?

Real property, other than the home wherein you reside, is not protected from Chapter 7 liquidation. You may find protection with Chapter 13 reorganization, depending on your total debt, income and value of all your property. Each case is different. Consult an attorney experienced in bankruptcy law.

My name is on a family member’s bank account or deed, but only for estate planning purposes. Is it protected?

No. Any account, deed or other instrument in with your name on it is your property, and subject to liquidation.

Can I give my expensive property to a family member before filing bankruptcy, so it won’t be in my name anymore?

This is NOT advisable. A bankruptcy trustee has the power to set aside any transfer of property from you to friends or family up to 2 years prior to filing a bankruptcy case. Additionally, when you file for bankruptcy protection, you have a duty to disclose such transfers to your trustee. Bankruptcy trustees are quite adept at finding such transfers, and failure to disclose them could lead to a denial of your discharge and fresh start. Consult with an experienced bankruptcy attorney before taking any action regarding any property while you are in financial distress.

What are my responsibilities to my bankruptcy case?

Honesty, integrity and disclosure. Let your attorney know everything you know about your situation and truthfully answer all questions and provide requested documentation. An experienced bankruptcy attorney can help you successfully navigate the rules, requirements and duties necessary for you to receive your discharge and fresh start. The purpose of bankruptcy is to provide relief for honest but unfortunate debtors.

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