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The FAQs below will answer most general bankruptcy questions. If your question isn't answered below, please contact us. We're always adding to the list. You can also find lots of helpful information in our bankruptcy videos.

Now that you’ve decided to file bankruptcy (click the questions below):

Will bankruptcy relieve me of all of my debts?

Certain debts are “non-dischargeable” and will survive your bankruptcy. Some examples of non-dischargeable debts are domestic/child support obligations, student loans (in 99.9% of cases), “newer” income taxes, debts incurred by fraud, and debts owed to creditors that you do not list in your bankruptcy.

If I file bankruptcy can I wipe out my debt to the I.R.S.?

While debts owed to the IRS are typically non-dischargeable, in some situations debts to the IRS CAN be discharged. Because we are a tax law firm as well as bankruptcy firm, we have the expertise to answer complex tax questions that most bankruptcy attorneys will be unable to adequately address. Just because you have been told that I.R.S. debt is non-dischargeable by other sources does not mean that your I.R.S. debt cannot be discharged. There are a number of “tests” that must be satisfied for an income tax to be dischargeable. The two biggest requirements is that it has been at least two years since you filed the return, and at least three years since the return was “due” to be filed (these time periods can be suspended due to certain events). If this is a concern to you, it would be highly recommended that you hire us to research your IRS case to determine exactly when your tax debts can be discharged. If they are not yet “old” enough, we usually recommend you wait on the filing of your bankruptcy until such time as the tax debts ARE old enough, and just deal with IRS and your creditors in the meantime. Otherwise, a premature BK will relieve you of liability to every other creditor except the IRS – and you may have to deal with IRS for up to 10 years thereafter!

Will I lose everything I own? What happens to watches, antiques, cars, and furniture?

You will not lose everything you own. Even in a liquidating bankruptcy (a Chapter 7), you will get to keep many of your possessions. You can claim certain assets “exempt” from the claims of creditors. “Exemptions” are wide ranging and vary depending on which State is considered your residence for bankruptcy purposes. In Florida, the big exemptions are for (i) unlimited equity in your homestead, (ii) unlimited cash surrender value in life insurance policies, (iii) annuities, (iv) up to $1,000 equity in an automobile, (v) up to $1,000 equity in personal property (furniture, clothing, cash, etc.), (vi) an additional $4,000 for personal property beyond the first $1,000 if you don’t claim the benefits of a homestead.

It is also important to remember that most possessions are not worth the same amount as they were the day you purchased them. When you value your assets, be sure that you are listing the property’s current value (usually garage sale prices) and not the sales price when you purchased the item. We will work with you to ensure that you get an honest and maximized value for your exemptions.

What if my assets are worth more than the exemption amounts?

Do not despair! The excess of the value over the exempt amounts may be retained by you and bought back, if you will, from the trustee. Meaning, the trustee is entitled to everything above the exempt amounts (to be used to pay to the creditors). But the trustee has no interest in taking possession of, storing, insuring, advertising and selling the “overage”. So, you work out an agreement whereby you pay for the overage by making a few monthly payments to the trustee from your post-filing income.

In Florida, is my primary residence protected?

This is actually more complex than most practitioners will let on, but in most instances your homestead is protected in the State of Florida. In order to determine whether you have homestead rights in Florida for bankruptcy purposes, we will have to know how long you have lived in Florida, when you purchased the home, and whether you have made any improvements to the home in the recent past. But, let’s give it a shot here:

Look at where the Debtor has been domiciled for 730 days (2 years) prior to the Petition to claim a local homestead exemption. Even if the above rule is satisfied, the Debtor cannot exempt more than $125K in homestead equity unless he acquired that amount of interest more than 1215 days (about 3 years and 4 months) pre-Petition.

How much am I allotted for a car? Would it be better for me to buy an old clunker that I have no payments on or should I keep my current car with a high payment?

Once again, this depends on which exemptions you are permitted to use. Also, depending on which Chapter of bankruptcy you file, we may be able to make changes to your car payments. That said if you do not need an expensive car, and we can’t think of any reason why you would, it may be better to surrender a luxury car and trade it in for a significantly more affordable model. One of the hallmarks of good financial management is to find ways to cut down on your monthly expenses. If you have not already done so, you should visit www.daveramsey.com and watch the Dave Ramsey show on television or listen to the Dave Ramsey show on radio. Adopting some or all of his ideas can dramatically change your financial life for the rest of your life.

I know I am going to file bankruptcy. Can I give a family member all of my valuable possessions? Can I run up all my credit cards, since they will be discharged in the bankruptcy?

First of all, do not make any big purchases on credit on the eve of a bankruptcy! The system is typically straight forward, but abusing the system can have dire consequences, including a potential revocation of your discharge (you will still owe all of your creditors in full).

That said you could transfer assets to family members, so long as they pay fair market value in the sale. Of course, what would you do with the cash you receive from the sale? You can’t hide it and you must disclose all your assets and all sales made in the one year prior to the date you file your BK. If you do sell assets (to family, friends or to anyone), we can advise you what you can and cannot do with the money. For example, you can pay newer, otherwise non-dischargeable income taxes; you can make a current estimated tax payment; you can pay your current accounting fees and your bankruptcy attorney. It is important to note that transferring assets to family members will catch the eye of the Bankruptcy Trustee, which is not necessarily a good thing. Be prepared to defend the price at which you sell!

As to the credit cards, any debts for “luxury items” purchased on the eve of your bankruptcy could potentially be non-dischargeable. Just because you plan to file bankruptcy, does not mean you can abuse your creditors.

Who will find out about my bankruptcy? Will my boss, my neighbors, my church members, and my family learn that I filed bankruptcy?

While your bankruptcy filing is a public record, it is unlikely that most of the people with whom you communicate on a day-to-day basis will ever know. If institutional lenders hold most of your debt, it is even less likely. Typically, only creditors will receive notice of a bankruptcy: this includes anyone you owe money to, and usually not your boss. It is important to remember that these are unprecedented times of financial strife; several of your friends and neighbors have probably filed without you ever knowing about it.

If I own real estate that I do not want to keep, what happens as a result of the BK?

Once you file for bankruptcy protection, an automatic “stay” goes into effect. The automatic stay stops foreclosure proceedings, lawsuits against you (civil, not criminal), pending repossessions, and a wide variety of other actions where your assets could be taken. As a result, a foreclosure proceeding will be “stopped,” pending the outcome of your bankruptcy.

If you file a chapter 7 and wish to give up or “surrender” the property, we will so notify the court and the creditor. The creditor can then file a Motion for Relief from Stay which, when granted, will allow the creditor to continue with the foreclosure proceedings. Be advised that the foreclosure proceedings MUST continue in order for the creditor to (i) obtain clear title by cutting out any junior liens, and (ii) obtain rightful possession by eliminating your right (or the right of any tenant) to remain in possession of the property. The lender will not get a judgment for money damages from you because your obligation will be discharged in the BK. Nevertheless, the foreclosure proceedings WILL continue and you WILL continue to receive paperwork and pleadings in the matter. Please do NOT bother us with this paperwork. Your bankruptcy fee does not include our involvement in that type of post-BK proceeding and you don’t really need any representation either.

In a Chapter 13, you will still either (i) surrender the property as discussed above, or (ii) elect to keep the property and deal with the property and loan in the chapter 13 plan. Here are three (3) typical scenarios of what would happen in the chapter 13:

(i) You are current in your mortgage payments – you would continue to make the monthly payments in full and on time, and continue to do so after the conclusion of your BK; or

(ii) You are behind on your mortgage payments but are in a position to start making your payments in full and on time now – you would start making your regular monthly payments but we take the amount by which you were behind (called the “arrearage”) and repay the arrearage by including as part of your plan payment an amount equal to the total arrearage divided by the number of months in the repayment plan (from 36 to 60, but usually 60). We can strip under-secured mortgages (under water mortgages)

(iii) You have a second mortgage but it is wholly unsecured – this means that the amount you owe on the first mortgage is more than what your primary resident is worth, such that there is no equity to support the second mortgage. In this case, we can file a Motion to “strip” the second lien which means it is to be treated the same as general, unsecured debts (like credit cards). If you successfully complete the chapter 13 plan, you will be absolved of the second mortgage debt and a release of that mortgage will be recorded. “Lien Stripping” is one of the biggest advantages to a Chapter 13- it is not available in a Chapter 7.

If after the bankruptcy process starts, can it be reversed should I come into money, win the lottery, etc?

Once you file, you do not have the unilateral right to say,”never mind.” You could ask the court to allow you to withdraw your case, but it is discretionary. But once you file, you get to keep any later lottery winnings, and inheritances that arise more than 6 months after the date you file. Of course, if you were to unexpectedly receive a windfall, you can always choose to voluntarily pay back some or all of what you owed to your creditors but you are under no obligation to do so.

How long after the bankruptcy can I establish credit? How long will a bankruptcy remain on my credit?

In many cases, you can start repairing your credit much sooner than it takes for the bankruptcy to be expunged from your credit history. Typically a bankruptcy will remain on your credit report for 10 years from the date of your discharge. In a Chapter 13, the bankruptcy will remain on your credit for 7 years from the date of discharge. Establishing credit after a bankruptcy is a long process. This is probably the biggest road-block to many clients, but it a small trade off for most of our clients to obtain the peace of mind that comes with being debt free. However, having said that, let me tell you that if you keep making any car and house payments in full and on time, and maybe apply for a debit or credit card, use it sparingly but always pay it in full and on time, you should be able to greatly improve your credit score within 2 years. We have never had a client contact us after filing bankruptcy and say that they regretted filing bankruptcy.

Will I be able to keep one of my credit cards after I file bankruptcy?

Typically, the bank will cancel even current credit cards after you file for bankruptcy protection. This does not necessarily include company credit cards where your credit is not at issue. If you have one credit card that you use and pay in full each month, we don’t consider that a “debt” that needs to be disclosed. Perhaps that card won’t be canceled and you can continue to use the card post-petition.

After you receive a discharge, you can begin the long process of repairing your credit. Many clients will receive offers for new credit cards soon after their bankruptcy discharge. It is important to keep yourself from falling into credit card debt after going through the difficult process of filing a bankruptcy.

I am married. Does my spouse also have to file bankruptcy?

Just because you are married does not mean that both spouses have to file bankruptcy. If only one spouse is liable for most of your debts, it may be highly preferable not to jointly file. In many cases, it may be necessary for both spouses to file, especially if most of your debt is jointly held by both spouses. Regardless, the non-filing spouse must disclose his or her income to the court so that the court can determine the debtor’s household income.

How long will it take from the time I start the process until my bankruptcy is completed?

If by “starting” you mean when we give you the package of documents to work on, then it depends on how long it takes you to get us ALL the information we need. Once we have all the information, it will usually take us 7-14 days to get you the petition and schedules for you to sign and us to file with the court. A Chapter 7 usually takes about 4 months from when we file until the court enters the Discharge. A Chapter 13 can take anywhere from 3 to 5 years to complete.

What other expenses are involved besides your fee?

Normally, the only additional expenses to our fees are filing fees with the Bankruptcy Court, costs related to mailings/ copies/ other administrative expenses, copies of credit reports, and the on-line credit counseling courses you are required by law to take (one before filing and one afterward but before the Discharge).

I filed bankruptcy in the past. How long do I have to wait before I can file again?

While this is not always the case, the general time periods are as follows (from the date of filing of the first BK to the date of filing a second bankruptcy petition):

  • 8 years between Chapter 7s.
  • 2 years between Chapter 13s.
  • 4 years between a Chapter 7 and a Chapter 13.
  • 6 years between a Chapter 13 and Chapter 7.

Can I continue to use my credit cards?

No. Once you have met with a bankruptcy attorney a presumption arises that you intend to file bankruptcy. So when you use the credit card afterward it can be argued that you did not have the intention to repay the credit card charge when it was incurred. You can’t discharge a debt that was incurred without the honest intention of repaying it. That can be inferred by your economic situation at the time. So you have to quit using your charge cards. Otherwise, you run the risk of the creditor objecting to the discharge of that debt.

How does the bankruptcy process work?

First, we give you a questionnaire to complete. This will ask you to describe your assets, your debts, your income and your living expenses. It will also ask you about assets you sold or gave away. Please be neat and complete. If there is a question that does not apply to you, do not simply skip it. Instead answer it with “N/A” for not applicable. After it is completed, fax it to my paralegal, Kathy Roberts at 1-888-377-4081 .

Then what?

We will pull your credit report, do an asset search, and then prepare a petition and schedules for you to review. Please review it carefully as you are responsible for its accuracy and will need to sign it under penalties of perjury. Once all is in order, we will file it with the bankruptcy court.

When will creditors stop calling me?

Probably not until you file your case. In the meantime, you can tell your creditors that you are working on your bankruptcy filing but do not give your creditors our name or telephone number. Once the case is filed all your creditors are notified and given your case number. At that point they are prohibited by law from contacting you. The reason is the law imposes an automatic “stay” on all proceedings – creditors can not call or continue to prosecute or continue any law suit, even a divorce proceeding.

Will I have to appear in court?

In most bankruptcy cases, you will never have to appear before a judge. You will have a meeting with a Bankruptcy Trustee where you will be asked questions under oath. We ensure that an attorney is present with you at this meeting.

How long will I sit in front of the trustee? What sort of questions will he/she ask? How should I present myself? How should I be dressed?

There is no set time period for how long the “Meeting of the Creditors” will last. Typically, it takes about 5-10 minutes. Some typical questions are whether we informed you of the different types of bankruptcy options, whether the information on your schedules (bankruptcy information filed with the court) is correct, and whether you have any assets you did not disclose. This process is typically straightforward. As for attire, business casual is preferable.

What does the trustee do?

You are only allowed to keep a certain amount of assets when you file chapter 7 bankruptcy. The excess is available for your creditors. How it works is the trustee appointed to your case gathers the extra assets, sells them and pays your creditors based on the priority assigned to each claim.

Priority? What does that mean?

Not all claims are of equal importance in the eyes of the law. Some are more important than others. Those of more importance are a higher priority than others. There are several levels of priority claims and if a claim doesn’t fit within any of them, then it is accorded “non-priority” status. For example, debts for child support and newer tax debts are more important, thus of higher priority, than debts for credit cards. So the trustee distributes net proceeds first to the priority claims, in order of priority, then to the non-priority claims. If there isn’t enough money to satisfy a level in full, all creditors at that level share in the available funds on a pro rata basis. Afterward, any priority debts not satisfied survive the bankruptcy but any non-priority debt not satisfied is discharged or eliminated.

Why should I take the difficult steps of resolving my financial problems sooner rather than later?

This recommendation from one of our former clients speaks for itself:

“If I could give one recommendation, it would be to not procrastinate. By waiting for almost eight years to file, I caused my life to spiral out of control in every way possible. My depression alienated my family and made work and social contact impossible. I wasted so many valuable years of my life. In the end everything was gone, including my health. It has been 3 years since the bankruptcy and I am still continuing to try to put my life back together. I will never get back those years of worry and guilt. What a waste of life. Please feel free to re-write this any way that might help another person understand that it is better to take steps and move ahead.

Thank you for all your help. I could never repay you.”

end faq

 

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Disclaimer: The purpose of this site is to present options available for resolving outstanding debt issues, not to provide legal or professional advice. Each person's case is fact dependent. You should not assume that any particular option discussed herein would apply in your case or be beneficial to you. You should consult with an experienced and licensed attorney to review the options that may be applicable to your fact pattern. Sending us an email or requesting information does not create an attorney-client relationship.

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