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Bankruptcy Questions

How to avoid bankruptcy?

One of the common questions asked is: how do I avoid bankruptcy? In the State of Florida the primary reason cited by debtor’s as the reason they have decided to declare bankruptcy is an unexpected medical debt. Thus, even the most financially astute and savvy consumers can run into trouble. Bankruptcy is not a right that should be looked upon with derision it is an opportunity for a fresh start. If you are looking to avoid bankruptcy, credit counseling, mortgage modifications or short sales may all help you get back on your feet.

What is a Chapter 7 bankruptcy?

A Chapter 7 bankruptcy is generally referred to as a liquidation bankruptcy. Generally, in a Chapter 7 bankruptcy the debtor turns over all assets for a bankruptcy liquidation sale, and the creditor is forced to discharge the consumer’s debt. However, because of exemptions to this liquidation, the debtor is allowed to keep most of their personal property even after the bankruptcy is concluded. In most cases all of a consumer’s property qualifies for an exemption that allows them to keep the property even at the conclusion of the bankruptcy case.

What is a Chapter 11 bankruptcy?

A Chapter 11 bankruptcy is generally referred to as business reorganization bankruptcy. While a Chapter 11 bankruptcy is available for individuals, a Chapter 11 bankruptcy is generally used by businesses to reorganize their debt while they continue to operate. While in a Chapter 11 bankruptcy the debtor develops a plan to pay off their debts. This plan must be approved by the creditors or go through a “cram down” method. In order for the debtor to “cram down” the plan they must pass certain tests that are in the bankruptcy law. Outside of corporations, a Chapter 11 bankruptcy is used by individuals that have debts in excess of 1.5 million dollars. Small businesses or partnerships may choose to use this form of bankruptcy as it can help them preserve their business, while giving them the flexibility needed to deal with their creditors.

What is a Chapter 13 bankruptcy?

A Chapter 13 bankruptcy is a debtor reorganization bankruptcy that allows debtors to develop a payment plan and pay off creditors. A chapter 13 bankruptcy is generally used by consumers who fail the means test or have significant assets they don’t want to lose in liquidation. Generally, a Chapter 13 bankruptcy plan uses the disposable income of the consumer, as determined by applying a statutory test, and allows the consumer to pay off their debts within 5 years. In a Chapter 13 bankruptcy the unsecured creditors must be paid at least as much as if the debtor had filed under a Chapter 7 liquidation bankruptcy.

Is bankruptcy right for me?

Only the individual debtor can make that determination. However, in order to ensure that you are fully aware of your rights under the bankruptcy laws, the determination should be made after consultation with an attorney. While helpful, internet and other resources in the public domain deal in generalities and are not a substitute for a discussion with an attorney who is experienced with the nuances of the bankruptcy laws and how they relate to your specific situation. A bankruptcy attorney will allow you to make an educated and informed decision about whether bankruptcy is the best option for your needs.

What about recent bankuptcy legislation?

When people are talking about recent bankruptcy legislation, they are generally referring to the bankruptcy overhaul done through the Bankuptcy Reform Act of 2005.  This legistlation, which was crafted by creditors, was supposed to reduce the fraud and abuse in the bankruptcy system. Unfortunately, the Act has pushed more middle income citizens into Chapter 13 bankruptcies, added certain educational requirements for all debtors and increased the costs of filing for bankruptcy.  However, for all its challenges, it does still provide an excellent opportunity for Americans to start fresh.

How much does it cost to file bankruptcy?

There are several costs associated with filing bankruptcy.

  1. Filing Fees:  Chapter 7 is $306 and Chapter 13 is $281
  2. Required Credit Counseling and Debtor Education Course:  $50
  3. Attorney Fees:  These vary based on the complexity of your case.

Beware of document preparation services and low cost legal services.  Generally, these are not staffed by attorneys.

Do I qualify for bankruptcy?

Most everyone can file for bankruptcy.  However, you can not receive a second discharge under Chapter 7 within 8 years of a previous discharge for a Chapter 7 bankruptcy.  Likewise, under a Chapter 13 bankruptcy, you can not receive a discharge if you received a previous Chapter 13 discharge within the previous 2 years.  There are many variables under each Chapter and it is advisable to meet with an attorney to determine if bankruptcy is right for you.

What is debt settlement?

Debt settlement generally refers to the process when a creditor accepts less than they are owed for the full payment of the debt.  This is an area of consumer debt solutions where the consumer can be preyed upon by unscrupulous businesses that offer quick and easy “get rid of debt” plans.  The unethical companies do not listen to your situation, nor do they take into account your true financial situation.  They are a business designed to make money.  More commonly, they take a cut of your payments and leave you with the debt when you can’t complete their plan.

What is debt harassment?

When a debtor is delinquent on a debt collection, agencies can become aggressive in attempting to collect the debt.  They can harass, oppress or abuse you (or someone you know) to induce you to pay the debt.  The Fair Debt Collection Act prohibits this conduct.  We can help you determine if you have been a victim of debt harassment.  If the collection agency has violated the FDCA, you could recover monetary damages.

How can I stop debt harassment?

The Fair Debt Collection Act regulates the conduct of collection agents.  To stop the calls from a collection agent, you must notify them in writing to stop contacting you.  After receipt of the letter, the collection agent may only contact you to notify that they will cease communications or that they will file an appropriate lawsuit.  However, this does not discharge the debt.  We can help you end debt harassment and determine if the collection agency has violated the FDCA.  If they have you could recover monetary damages.

How long will a bankruptcy be on my credit report?

A Chapter 7 bankruptcy will stay on your credit report for 10 years.

A Chapter 13 bankruptcy will remain on your credit report for 7 years.

What is the process for filing for bankruptcy?

After you retain legal representation, you will work with your attorney to determine your assets and expenses that must be listed for the trustee. Your attorney will also work with you to acquire certain documents required for the court filing.  During this time, you will need to complete an online credit counseling course.  Once all this is accomplished, a Petition will be filed that will commence the bankruptcy proceedings.

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