Bankruptcy

As in any court, individuals have a right to represent themselves before the Bankruptcy Court. However, bankruptcy is a complex area and involves many considerations, including whether to file, the election of the appropriate chapter, use of exemptions, understanding all protections of the Bankruptcy Code and using them to your advantage. The right decision for you depends on an evaluation of your family status, your assets, your obligations and other factors. An attorney can explain to you how the process works and can help you reach an intelligent decision. Our attorneys have the necessary experience, knowledge, and skill in this area of Florida law.

Bankruptcy is a process by which consumers can eliminate or repay some, or all, of their debts under the protection of the federal bankruptcy court. Generally, bankruptcy takes one of two forms — liquidation or reorganization.

In the short term, bankruptcy prevents continued efforts by creditors to collect debts. In the long term, bankruptcy can eliminate repayment obligations or provide for a restructuring of the debtor’s obligations, thus enabling the debtor to obtain a fresh start.

It is often said that bankruptcy should be a “last resort” for financially troubled consumers. This advice is oversimplified. In some cases, legal rights can be lost by delay. It is especially important to get early advice about bankruptcy if you are hoping to use the bankruptcy process to help save a home or a car.

Many consumers are able to obtain credit after filing bankruptcy.  You also may be concerned that you may be discriminated against for having filed bankruptcy. However, in most cases “governmental units” are not permitted to discriminate on this basis. Further, private employers may not terminate employment or discriminate with respect to employment based upon a bankruptcy filing or discharged debts.

What bankruptcy can and cannot do

Bankruptcy may make it possible for you to:

  • Eliminate the legal obligation to pay most or all debts. This provision is called a “discharge,” which is designed to give the debtor a fresh financial start.
  • Stop foreclosure on a home and allow you an opportunity to cure a default.
  • Prevent repossession of an automobile or other personal property.
  • Stop wage garnishment, debt collection harassment and other similar collection activities.
  • Lower monthly payments on some debts, including some secured debts such as mortgages or car loans.

Bankruptcy, however, cannot cure every financial problem. In bankruptcy, it usually is not possible to:

  • Modify certain rights of secured creditors. Although you can force secured creditors to take payments over time in the bankruptcy process to cure a default, some secured creditors are afforded protection from other modifications of the loan terms.
  • Discharge certain types of debts singled out by the Bankruptcy Code for special treatment, such as child support, alimony, most student loans, court restitution orders, criminal fines and most taxes.
  • Protect all co-signers on their debts. When a relative or friend has co-signed a loan and the debtor discharges the loan in bankruptcy, the co-signor may still have an obligation to repay all or part of the loan.
  • Discharge debts that are incurred after bankruptcy has been filed.

Types of bankruptcy:

There are six basic types of bankruptcy cases provided under the Bankruptcy Code. The cases are traditionally given the names of the chapters that describe them. Determining which type of bankruptcy to file is based upon analysis of numerous factors, including income, assets, debt, type of debt and the consumer’s goal in filing bankruptcy, among other factors. Most consumers, however, will file bankruptcy under either Chapter 7 or Chapter 13.

Overview

A Chapter 7 bankruptcy, titled “Liquidation,” contemplates an orderly, court-supervised procedure by which a trustee (an individual who administers a bankruptcy estate, which is created by the filing of a bankruptcy) examines your assets to determine if any property is available to be sold or recovered for the benefit of creditors.

Certain property cannot be liquidated by the trustee because it is “exempt.” Florida law governs which property is exempt from attachment by your creditors. In most cases, most of your property, including personal property, will be exempt under Florida law. Because there is usually little, or no, nonexempt property in most Chapter 7 cases, there may not be an actual liquidation of your assets. These cases are called “no-asset cases.”

If you are filing as an individual, you receive a discharge that releases you from personal liability for dischargeable debts. You usually receive a discharge just a few months after filing bankruptcy.

One of the principal advantages of Chapter 7 is that you emerge from bankruptcy without any future obligations on your discharged debts, obtaining a “fresh start.”

One of the primary purposes of bankruptcy is to discharge certain debts to give you “fresh start.” Although an individual Chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute.

The 2005 amendments to the Bankruptcy Code included a “means test” intended to make it more difficult for wealthy consumers to file Chapter 7 bankruptcy. If your income is below the median family income for your household size, you need not worry about the “means test.”

If your current monthly income (CMI) exceeds Florida’s median income, then the “means test” applies a more complicated expense formula to arrive at your eligibility for a Chapter 7 bankruptcy.

A Chapter 13, titled “Adjustments of Debts of an Individual with Regular Income,” is often referred to as “reorganization.” A Chapter 13 is regularly filed by individuals who want to catch up on a past-due mortgage or car loan, modify their mortgage payment through bankruptcy or otherwise attempt to keep their assets.

In a Chapter 13 case, you submit a plan to repay creditors all or part of the money owed to them over a three- to five-year period, usually funded from future income. If the plan meets the requirements set out in the Bankruptcy Code and is confirmed by the bankruptcy court, your payments under the plan are distributed to creditors by the Chapter 13 trustee.

Unlike in Chapter 7, you do not receive an immediate discharge of debts. You must complete the payments required under the plan before the discharge is received. You are protected from lawsuits, garnishments and other creditor actions while the plan is in effect. The discharge in a Chapter 13 is also somewhat broader (i.e., more debts are eliminated) than the discharge under Chapter 7.

Please contact us for a free consultation with our dedicated and knowledgeable attorneys to help you with your legal needs. To schedule a free consultation with one of our attorneys, call us today at (305) 442-1439. To reach us via email, please fill out our online contact form available under the “Contact Us” tab, and a member of our staff will contact you promptly. We look forward to serving you.

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