We, at Tudhope Law in Orlando, understand that hiring an attorney is a serious matter and that you may have important questions about your potential case. We also know that your time is valuable. Therefore, we have provided you below with the answers to a number of commonly asked questions. Because these answers are general in nature, we strongly recommend that you consult an attorney prior to acting on any of the information listed below. Remember, every case is different and it is imperative that a trained legal professional evaluate your case and advise you on your best course of action. Contact us at 407-969-0044 today to set up a personal consultation to discuss your case.
How do I know if I am eligible to file for bankruptcy?
If you are experiencing a financial hardship and are exploring the option of bankruptcy for the first time, it is likely that you will be eligible to file. Under the Bankruptcy Code, there are different Chapters under which one may file, depending on the circumstances. A number of factors must be taken into consideration when deciding which Chapter is best for you; an attorney trained in bankruptcy law can assist you with this decision. If you are suffering from financial difficulties, cannot afford to pay your bills, and are losing sleep over your financial situation; please consult with a bankruptcy attorney immediately at Tudhope Law, to determine your eligibility and the type of bankruptcy filing which will be most beneficial to you.
What is a Chapter 7 bankruptcy?
A Chapter 7 bankruptcy is commonly known as a “straight liquidation bankruptcy.” Debtors are required to list all assets and all debts in their bankruptcy petitions. In Chapter 7, a debtor’s assets will be categorized as exempt or non-exempt. All non-exempt assets must be turned over to a Bankruptcy Trustee, who is appointed in each case by the federal Bankruptcy Court. The Trustee will then sell the non-exempt assets, and use the proceeds of the sale, if any, to pay creditors. Exempt assets, on the other hand, are defined by Florida statute and such assets are specifically exempt from liquidation and may be retained by the debtor. Florida’s liberal exemption statutes can be an advantage to the Chapter 7 debtor. Filing for bankruptcy under Chapter 7 allows you to discharge, or eliminate, most if not all of your personal debts. With some exceptions, you will no longer have to repay those debts following discharge and you may then obtain a fresh financial start.
Chapter 7 Bankruptcy Process
The Chapter 7 Bankruptcy process is much like the other Chapters of bankruptcy. However, two of the major differences between the Chapter 7 process versus other Chapters is that Chapter 7 is a straight liquidation bankruptcy which also requires filers to qualify under mediation income requirements (otherwise known as the “Means Test.”) The current median income requirements are based upon the Census Bureau’s data collection, and are periodically updated to the bankruptcy median income requirements by the United States Trustee. If a filer is qualifying or otherwise passing the Means Test, the next step is to conduct a straight liquidation or asset analysis. All Chapters of bankruptcy require a filer to disclose assets. A Chapter 7 bankruptcy is a straight liquidation bankruptcy and therefore a filer who has many valuable assets, may find him or herself either having to liquidate some valuable assets or having to pay money to the bankruptcy estate in lieu of liquidation. This analysis is fact based, and all outcomes for filers vary from filer to filer. Along with assets and income, the bankruptcy petition requires a filer to disclose all debts, as well as other various financial affairs throughout the bankruptcy petition. Once these matters are addressed, the bankruptcy petition is prepared, reviewed, signed, and filed with the Court. The filer’s protections from creditor collection activity begins at the inception of the case (or the file date).
Do I have to include all my debts when I file for bankruptcy?
The bankruptcy code does allow you to retain certain secured property (i.e. vehicles, homestead, and other real property). Your unsecured debts (i.e. credit cards, personal loans, etc.) must be included in the bankruptcy and are subject to discharge. There may be special exceptions to this requirement, but by and large, you will not be permitted to pick and choose between unsecured debts. To learn more about any special exceptions, please consult with a bankruptcy lawyer at Tudhope Law in Central Florida.
Is my income taken into consideration when filing for bankruptcy?
In personal bankruptcy Chapters, your current monthly income must be disclosed to the Court. This is done by completing Forms 22A or 22C (Statement of Current Monthly Income and Calculations) of the Bankruptcy Petition. Your monthly average income for the six (6) months preceding your bankruptcy filing, is compared to the annual and monthly median incomes for comparable household sizes in your geographical area. Certain narrow classes of income, including social security, will be excluded from these calculations. The results of this comparison may determine which bankruptcy Chapter you are eligible to file. In evaluating your case, the staff at Tudhope Law will examine your financial situation and fully explain where you stand in terms of your income qualifications for bankruptcy filing.
What is the “Means Test”?
In order to file a Chapter 7 bankruptcy, your currently monthly income must be calculated under what is referred to as the “Means Test.” Under the Means Test, your monthly income will be entered into certain bankruptcy forms and evaluated with information from the Census Bureau and the Internal Revenue Service (IRS). If debtor’s income exceeds the median income, then the debtor must apply the means test. If the means test shows that a debtor has sufficient disposable income to pay a significant portion of his unsecured debts, it is said that he does not “pass the Chapter 7 means test,” and he may be required to file a Chapter 13 bankruptcy. Your bankruptcy attorney can assist you in these calculations.
Do I have to liquidate or surrender any of my property?
Since a Chapter 7 bankruptcy is called the straight liquidation bankruptcy, there is a common misunderstanding that you must give up, liquidate, or otherwise lose your property, both real and personal. This is not always the case. In fact, many times this is not the case. Both State and Federal laws exist which protect your property from your creditors in bankruptcy. At Tudhope Law, during your bankruptcy consultation, all your assets will be discussed and taken into consideration in determining whether Chapter 7 is the best option for you.
What is a Chapter 13 bankruptcy?
If you do not pass the Chapter 7 Means Test, or if you are otherwise not eligible to file for Chapter 7, you may file for Chapter 13 bankruptcy. Chapter 13 bankruptcy is commonly referred to as “the Reorganization Bankruptcy.” Under Chapter 13, debt owed on your mortgage, vehicle loans, student loans, credit card debts and other unsecured debts, is consolidated into a reasonable, monthly, interest-free payment plan over a period of three (3) to five (5) years. Chapter 13 is not available to businesses; and those individuals wishing to file Chapter 13 must show a regular income. While you are in a Chapter 13 debt repayment plan, your creditors cannot contact you or otherwise attempt to collect money from you directly.
In a Chapter 13 bankruptcy, do I have to repay all of my debts?
A Chapter 13 bankruptcy requires you to pay a monthly payment to the Chapter 13 Bankruptcy Trustee. A common misunderstanding about Chapter 13 bankruptcy is that you must repay all of your debt. You are not required to pay back all of your debt! The bankruptcy laws control the amount you must repay, but you may still discharge or eliminate portions of your outstanding debt. Your monthly payment is calculated based upon your monthly income and expenses. However, your future goals regarding secured property (i.e. vehicles, homestead, and other real property) may also have an effect on how your monthly payment is calculated. If you have fallen behind in payments or are experiencing a financial hardship with your home or any other secured properties, Chapter 13 bankruptcy may offer you the opportunity save, or keep these properties. A skilled bankruptcy attorney can help you decide your best course of action in this situation.
Can filing for bankruptcy help me save my home?
Yes! In today’s market, a Chapter 13 bankruptcy may help you save your homestead by offering a very structured loan modification process, and may afford you the opportunity to discharge second mortgages, home equity lines, and other liens secured to your home. Here at Tudhope Law, our bankruptcy attorneys have assisted many Chapter 13 bankruptcy clients in obtaining workable loan modifications for their homesteads, oftentimes without the familiar frustrations of your bank’s loan modification process.
Can I file for bankruptcy in Florida?
If you are a Florida resident, you may file for bankruptcy in the state of Florida. You may only claim Florida’s statutory exemptions, however, if you have resided in Florida for the past two (2) years. Otherwise, you must use the exemptions from the state in which you previously resided, or perhaps the federal bankruptcy exemptions. Florida has three (3) federal districts in which bankruptcy cases may be filed: the Northern District, the Middle District and the Southern District. If you reside or are domiciled in one of the central Florida counties (including Orange, Seminole, Brevard, Lake, and Volusia) your case will be filed in the Orlando Division of the Middle District of Florida.
If I have previously filed for bankruptcy, am I able to file again?
There are many factors which come into play when you have previously filed for bankruptcy and received a discharge under any of the Bankruptcy Chapters, and are considering filing again. You must consult with a knowledgeable bankruptcy attorney regarding your eligibility to file under these circumstances. The Bankruptcy Code was amended in 2005 to state that debtors who have previously filed for and received a discharge in a Chapter 7 bankruptcy within eight (8) years of filing a new bankruptcy case, may not receive a discharge in their newly filed Chapter 7 case. Such debtors may file for and receive Chapter 13 relief, on the other hand, within four (4) years of receiving a Chapter 7 discharge. Debtors who have previously received a Chapter 13 discharge within the past six (6) years, and who file a new bankruptcy case under either Chapter 7 or Chapter 13, may also be eligible to receive a discharge in their case. The time periods run from the filing date of the first bankruptcy case. Bankruptcy Courts in some states have held that a debtor may file a Chapter 13 bankruptcy prior to expiration of the time periods set forth above, although a discharge may not be available in such cases. Such cases must be filed in good faith. Sequential bankruptcy filings are commonly referred to as “Chapter 20″ filings and one advantage of such filings is the opportunity to lien strip wholly unsecured second and third mortgages from your property. The U.S. District Court, Middle District Court of Florida is presently reviewing this issue in a pending appeal and the law is therefore in flux in this district. Even if you have filed for bankruptcy and received a discharge in the past four (4) to eight (8) years, contact the bankruptcy attorneys at Tudhope Law today to determine whether a new bankruptcy filing may allow you to remove unsecured liens or mortgages from your property.
Will bankruptcy stop my creditors from harassing me?
Generally, from the time you file for bankruptcy, all creditor collection activity is stayed or stopped and your creditors may no longer contact you regarding your debts. Once your bankruptcy is completed and you receive a final discharge order, the order prevents any creditors listed in your bankruptcy from seeking to collect against you in the future. An example of the types of collection activities that are stayed are as follows: the pursuit of collection efforts (informal, administrative, or judicial); enforcement of judgments against you or your property (including garnishments); repossessions or foreclosures of your property; and more. If you have had a vehicle repossessed, if your real property is in foreclosure, or if you are currently the target of similar collection activities, you must act quickly! Please contact the bankruptcy attorneys at Tudhope Law today to determine whether bankruptcy may be an option to help you save your property.
If a creditor has a judgment against me, will a bankruptcy discharge eliminate that judgment?
Yes, many types of general liability judgments are dischargeable through bankruptcy. Some examples of judgments which may be discharged in bankruptcy are: judgments based on defaulted loans; non-payment of credit cards; breach of contract; and many others. Contact Tudhope Law today to determine whether a judgment against you may be dischargeable in bankruptcy.
Can I eliminate my student loan debt?
Generally, no; student loans are not dischargeable in bankruptcy. However, under 11 U.S.C. § 523(a)(8) of the Bankruptcy Code, two exceptions exist to the general rule. First, if a student loan is neither “insured or guaranteed by a governmental unit” nor “made under any program funded in whole or in part by a governmental unit or nonprofit institution,” it may be discharged. Second, if paying the loan will “impose an undue hardship on the debtor and the debtor’s dependents,” the loan may be discharged. Be Warned: it is unusually difficult to show undue hardship sufficient to allow a discharge of student loans in bankruptcy. Such cases are heavily fact significant and Bankruptcy Courts rely on local precedent. It will furthermore be necessary for a debtor seeking to discharge a student loan debt to file a separate adversary proceeding in order to obtain a final court order declaring the debt discharged. If you have questions about the dischargeability of your student loans, please contact us at Tudhope Law for assistance and advice.
Can I eliminate my IRS debt?
Generally, no; IRS debt is not dischargeable in bankruptcy. However, there are some exceptions to this rule.If your tax debt arose at least three (3) years prior to your bankruptcy filing, the tax return was filed at least two (2) years prior to your bankruptcy filing, and your taxes were assessed within two hundred and forty (240) days prior to the bankruptcy filing, then your IRS debt is likely to be discharged. However, this exception applies only to Income tax liability. Other tax obligations such as payroll tax, sales tax, fraud penalties, or the willful attempts to evade paying taxes, are not dischargeable in bankruptcy.
Is there a difference between a Chapter 7 discharge and a Chapter 13 discharge?
Yes, there are certain debts which may be dischargeable in a Chapter 13 bankruptcy, which are not dischargeable in a Chapter 7 bankruptcy. Some examples of such debts which may be dischargeable in Chapter 13 but not in Chapter 7, are: second liens attached to your homestead property, debts for the willful and malicious injury to property, certain tax obligations, and certain debts arising from property settlements in divorce or separation proceedings.
How does a bankruptcy affect my credit?
This is a universal question that does not have a universal response. Bankruptcy has an initial affect your credit score. However, the type of bankruptcy, whether Chapter 7, 11 or 13, will affect an individual’s credit differently. As a general response, if you are in need of a bankruptcy, the initial affect to your credit score should not necessarily guide you in your decision on whether or not to file. Often times, those in need of a fresh start who choose not to file for bankruptcy will have a harder time rehabilitating their credit in the future. Those who are unable to pay their debt today, however, and opt for bankruptcy, are ultimately afforded the opportunity in the future to obtain credit cards, purchase vehicles, and qualify for mortgage loans. While these things may not happen overnight, you may be surprised as to the actual positive effects your bankruptcy will have on your life. Again, this is a universal question that does not have a universal response. You should consult with a bankruptcy attorney to discuss your particular financial situation and your ultimate goals.
I’m married; if I file for bankruptcy, must my spouse file for bankruptcy, as well?
No, you may file for bankruptcy individually and without your spouse, although your spouse may still be liable for joint debts. Married debtors filing jointly will be charged a single filing fee by the Bankruptcy Court and may double their exemptions. If you and your spouse are jointly obligated on most of your debts, it may be advisable to file a joint bankruptcy. If most of your debts are in only one spouse’s name or if one spouse has non-dischargeable debts, then an individual bankruptcy may be more appropriate. One spouse’s individual bankruptcy generally will not adversely affect the non-filing spouse although if the parties have joint debts, the bankruptcy will likely show up on the non-filing spouse’s credit report. If you are married and considering filing bankruptcy, the Orlando bankruptcy attorneys at Tudhope Law can assist you in determining the best course of action for both you and your spouse.
I own a business and it is suffering financial hardship; should I file a business bankruptcy?
Business entities can file for bankruptcy under either Chapter 7 or Chapter 11. In determining under which bankruptcy Chapter your business should file, your goals concerning the business’s future must be taken into consideration. As a practical matter, if you plan on closing your business or if your business is already closed, a Chapter 7 liquidation bankruptcy would be appropriate. Upon filing, assets which are owned by the business, will be subject to liquidation by a Trustee assigned by the Bankruptcy Court in order to distribute any proceeds to your business’ creditors. At the time of filing, all business operations must cease, and doors must close. On the other hand, if your business is having trouble paying all of it’s present debt, but the business does earn a monthly income, a Chapter 11 bankruptcy may be the better fit. A Chapter 11 bankruptcy is similar to a personal Chapter 13 bankruptcy in that the Chapter 11 acts as a reorganization bankruptcy for the business. At the time of filing, the business does not have to cease operations, and may be able to successfully remain open and operating in the future. If your business is suffering financial hardship, it is a good idea to obtain the legal advice of a knowledgeable bankruptcy attorney as soon as possible in order to explore your options and to determine your best course of action.
I personally guaranteed my business debt; should I file a personal bankruptcy?
Often times, business owners are required to personally guarantee business debt. If you have personally guaranteed a loan or other debt for you business, and that debt is about to or has become in default, you will be personally liable for the loan. Personally guaranteed business debt is dischargeable, but only in a personal bankruptcy filed by you. If you file a business bankruptcy, although your business may no longer be liable for its debts, the creditor holding your personal guarantee will continue to retain a legal basis to sue you personally in your capacity as the personal guarantor. On the other hand, if you file a personal bankruptcy, your personal liability can be discharged, and the creditor will no longer have a legal right to attempt to collect against you. If you have questions concerning a personal guarantee on business debt and its impact on a potential bankruptcy, contact the bankruptcy attorneys at Tudhope Law to determine your best course of action.
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