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Bankruptcy Q & A

FREQUENTLY ASKED QUESTIONS

Bankruptcy

If your debts have gotten out of hand and you’re afraid to open your mail or answer the phone, it may be time to consider filing for bankruptcy. Often, all debts can be discharged without any loss of assets, and it generally does not make any difference whether your problems were caused by unexpected emergencies or because you have just overspent.

Q: What is bankruptcy?

A: Bankruptcy is a procedure that allows an individual or corporation to eliminate or reorganize their debt under the protection of the bankruptcy court.

Q: What types of Bankruptcy are there?

A: Bankruptcies are either liquidating or reorganizing.  A liquidating bankruptcy is one where all debts are discharged and you give up and lose all non-exempt assets; in a reorganizing bankruptcy, you file a plan showing how you will repay their creditors over a period of time. Some debts must be repaid in full; others are paid in part; some are not paid at all.

Q: What is a Chapter 7 bankruptcy?

A: Chapter 7 is a liquidating bankruptcy:  this means that at the end of the bankruptcy, you will no longer have any debt, will keep exempt property (often all property you own is exempt) and will lose all assets other than ‘exempt’ property.

Q: What is ‘exempt property’?

A: Exempt’ property is property you can keep under State or Federal law even though all other debts have been discharged or cancelled. Some of the common exemptions (depending on state law) are:

  • Homestead- You can exempt all or a portion of your home from the claims of creditors;
  • Insurance/retirement plans- certain types of retirement plans and the cash values of life insurance policies are exempt from the claims of creditors;
  • Personal Property- Depending on state law, the debtor can exempt household goods, furniture and furnishings, and clothing. There is a limit on the amount of personal property that the debtor can exempt.

What is a Chapter 13 bankruptcy?

A: Chapter 13 (as well as Chapter 11) is a reorganization of debt to allow you to pay all or a portion of what you owe over a period of time under a plan of repayment.

Q: Why would you choose to reorganize your debt under Chapter 13 instead of discharging it under Chapter 7?

A: Chapter 7 bankruptcy is not available if a debtor has previously filed for bankruptcy protection within the previous 6 years. Additionally, you may have valuable nonexempt assets that would be lost in a Chapter 7 liquidating bankruptcy. You may also have debts that cannot be discharged or debt that is secured by property which you want to keep.

Q: What types of debts are not dischargeable?

A: Some types of debts that will not be discharged in a Chapter 7 bankruptcy must be paid in full in a Chapter 13 reorganization. These include:

  • Child support and alimony
  • Most student loans, except under certain circumstances
  • Most tax debts
  • Debts which are the result of fraud or criminal acts
  • Certain loans and credit purchases made within 60 days of filing for bankruptcy.

Q: How does a debtor file for bankruptcy?

A: A petition is filed with the bankruptcy court. These are various forms that show which debts are owed and what assets you have. Income, expenses and transfers of assets are also listed. If you file for bankruptcy you must pay a filing fee.

Q: Do I qualify for Bankruptcy

A: In order to file a Chapter 7 bankruptcy, if your debts are primarily consumer debts (as opposed to business debts), you must pass a Means Test. The Means Test determines and evaluates your income in comparison to the median income for households of your size in Florida. If your income suggests you may be able to pay a portion of your debt back, filing a Chapter 7 may be unavailable. However, you may be eligible for a Chapter 13 filing in bankruptcy court. This law eliminates abuse of the system by the unscrupulous individual. At Hoffman, Larin and Agnetti, PA, we will advise you at our initial free consultation whether you will pass the Means Test and if not, what alternatives are available.

Q: What happens after filing for bankruptcy?

A: A court-appointed trustee is assigned to oversee the bankruptcy case. A meeting of creditors, which you must attend, will take place 4-6 weeks after filing. At this meeting the trustee will ask questions to determine whether the information in the petition is correct. The trustee may ask you for additional records. Creditors rarely attend this meeting, however, if they do, they can also ask questions. The meeting usually is very short. In approximately 3-6 months you will receive a notice that your debt has been discharged.

Q: When will the creditors stop calling me?

A:Upon filing the bankruptcy, no creditor can take any action to collect or enforce any debt except through the bankruptcy court. If a creditor calls after filing, they are advised that a bankruptcy has been filed and given the case number of the filing. If a creditor continues to harass the debtor after the filing, the creditor may be subject to being sued under various state and federal collection laws.

Hoffman, Larin & Agnetti, PA offers a free consultation. Let us evaluate the specific facts of your case and make recommendations that address your individual issues. Call us at (305) 653-5555. Convenient payment plans to meet your budget are available.