Common Bankruptcy Questions
1. Do have to take a credit counseling course before I file bankruptcy?
The new bankruptcy law requires all debtors to fulfill two education requirements: a credit counseling course prior to filing and a financial management course after the filing date. Failure to complete either of these courses and file the appropriate certificates with the court will prevent a successful bankruptcy. The Chapter 13 Trustee will offer the required courses to Chapter 13 debtors, but Chapter 7 debtors are required to take the courses on their own. All bankruptcy education courses are available in person, by phone, or over the internet and are approved for the district in which you are filing. Most courses take less than one hour to complete and costs less than $50. You may get additional information about the costs and availability of debtor education at one or more of the following agencies approved for the Middle District of Florida: In Charge Education Foundation, Inc.; Consumer Credit Counseling Service of San Francisco; GreenPath Debt Solutions; In Person and Internet Institute for Financial Literacy; Telephonic Money Management International, Inc.; Novadebt.
2. Who can file bankruptcy?
Any person residing, domiciled, or having property or a place of business in the United States may file Chapter 7. A business may also file a Chapter 7. The new bankruptcy law includes a “means test” which applies an income vs. expense test in order to file Chapter 7 bankruptcy. If the means test indicates you have enough disposible income to pay a significant portion of your unsecured debts you have to file under Chapter 13, provided you meet Chapter 13 debt ceilings. There are currently no minimum or maximum income limits or other income requirements or limitations for people whose unsecured debts are primarily non-consumer debts such as investment liability, business losses, taxes, or student loans.
3. What is a Chapter 7 bankruptcy?
Chapter 7 bankruptcy is the most common type of bankruptcy and is often referred to as a “liquidation bankruptcy.” In Chapter 7, all of the debtor’s assets, other than those types of assets specifically exempt from liquidation by statute, are turned over to a bankruptcy trustee for sale. Sale proceeds, if any, are distributed among the creditors. Most Florida Chapter 7 debtors have little non-exempt personal property because of Florida’s liberal exemption laws. Chapter 7 bankruptcy is used to eliminate, or discharge, primarily unsecured debts such as credit cards or medical bills. Chapter 7 does not eliminate secured debts, such as vehicles (unless the secured item is surrendered). Chapter 7 will not save a house from foreclosure nor a car from repossession if you are delinquent in payments. Under the new bankruptcy law, only people who pass the “means test” may file a Chapter 7 bankruptcy. People who fail the means test have to file Chapter 13 bankruptcy provided you are under Chapter 13 debt ceilings. The means test is a complicated mathematical formula. Your bankruptcy attorney can run a means test using bankruptcy software after he collects necessary information from you.
4. What is a Chapter 13 bankruptcy?
Chapter 13 bankruptcy results in a plan to repay all or part of your debt, but it is not designed to discharge or eliminate most debts. Chapter 13 is used most often to save a house from a foreclosure sale. You can use Chapter 13 to “strip” a second mortgage under certain circumstances. Chapter 13 is also useful to eliminate some IRS debt and to establish an affordable plan to pay IRS debt that cannot be eliminated. Chapter 13 bankruptcy is available to debtors with regular income. A business cannot file Chapter 13. In addition, there are upper limits on the amount of the individual’s secured and unsecured debts in Chapter 13 cases.
5. Who can file bankruptcy in the Southern District of Florida
The Southern District accepts bankruptcy filings from individuals who reside or are domiciled in one of several central Florida counties including Palm Beach and Martin Counties, and other surrounding counties. Any Florida resident can file bankruptcy in Florida. If you file bankruptcy in Florida, however, you can only claim Florida’s asset exemptions if you have resided in Florida for the previous two (2) years. Otherwise, you must use exemptions of the state where you previously lived for two years or, in some cases, the default set of federal bankruptcy exemptions.
4. Can married people file bankruptcy jointly?
Married debtors can file a joint bankruptcy petition for a single filing fee, and most attorneys charge the same legal fee for joint cases as they do for individual cases. Married couples who are jointly liable on most debts should file a joint bankruptcy. On the other hand, if only one spouse is liable on most of the debts, the indebted spouse may file an individual bankruptcy, and in most cases, the individual debtor’s bankruptcy will have no adverse effect on the non-filing spouse.
5. Do I need an attorney to file bankruptcy?
Bankruptcy law does not require that you hire an attorney to prepare a bankruptcy petition or to represent you in your bankruptcy case. If you enjoy doing things yourself, or if you really cannot afford an attorney, you can find forms on the internet needed needed to file your own petition. However, bankruptcy is a complicated area of the law, and the bankruptcy law gives no special treatment to debtors who file their own petition. The new bankruptcy law makes filing bankruptcy substantially more complicated and the practice of bankruptcy law is therefore more specialized. I strongly believe that the financial risk of filing your bankruptcy incorrectly under the new bankruptcy law is much greater than the amount of a reasonable fee paid to a bankruptcy attorney.
6. How much do attorneys charge for bankruptcy?
In the past, most consumer bankruptcies were relatively simple and legal fees were low. The new bankruptcy law increases the amount and complexity of legal work required to prepare a bankruptcy petition in Chapter 7 and successfully complete a filing, and as a result, legal fees are higher than they used to be. Also, the amount of work and fees will vary according to the debtor’s income level. Chapter 13 cases are more complicated, and legal fees are higher. If your Chapter 13 case involves a wholly-owned business, or other complicated legal issues, legal fees will be higher.
If you find yourself in such a position it is best to consult an attorney with substantial bankruptcy experience. There are so many different circumstances that a proper answer to your particular problem can only be obtained by a trained and experienced lawyer.
If you are considering bankruptcy or have a question about bankruptcy, our firm may be able to help you.
