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Bankruptcy is a legal proceeding that allows you to get out of debt and get a fresh start. The bankruptcy process is governed by an act of Congress known as the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and local rules of bankruptcy. The bankruptcy process also utilizes state laws to determine exemptions that vary from state to state and rights of parties within the proceeding.
Bankruptcy does not discharge most mortgages or liens. If the Debtor decides to keep his/her house or automobile, then payments must continue to be made. If the Debtor is facing a foreclosure or has had an automobile repossessed, then the Debtor may use a Chapter 13 to make payments over time to cure the past due payments and bring the loan current.
Frequently Asked Questions
Are there different forms of bankruptcy relief?
There are two types of bankruptcy relief that are available to you under the federal bankruptcy code. What kind of bankruptcy is right for you depends on your income and individual situation.
Chapter 7 bankruptcy may eliminate most kinds of unsecured debt. Some examples of unsecured debts are credit cards; medical bills; most personal loans; judgments resulting from car accidents; and deficiencies on repossessed vehicles.
Technically, the debtor’s assets are to be taken and sold so that the proceeds can be distributed to the debtor’s creditors. However, you typically can keep all of your property. This is because of many important exemptions that protect consumers. For further explanation of these exemptions, please see below. Also, contact us today for a free consultation and we will explain how these exemptions will affect your case.
Chapter 13 bankruptcy is an interest-free debt repayment plan through which you consolidate your debts and make a payment on your debt over a 3 to 5 year period. While in a Chapter 13 debt repayment plan, the creditors cannot collect from you, and the creditors are required by a Federal Court order to adhere to the terms of the plan. One very important thing to remember about Chapter 13 bankruptcy is that you must be working or have a consistent source of income for your repayment plan to be approved by the court. Not only must you be able to pay for your monthly living expenses, but you must also be able to make a payment to the court to consolidate your debts.
Debts that are generally consolidated in a Chapter 13 bankruptcy are mortgage arrears, balances on vehicle loans, student loans, credit card debts and other unsecured debts. All outstanding debts must be included in the Chapter 13 consolidation.
The individual(s) or business filing for bankruptcy is referred to as the “Debtor”. Once the Debtor files a “petition”, the bankruptcy court clerk mails out notices to all creditors advising of the “meeting of creditors”, which the Debtor is required to attend.
The meeting of creditors is conducted by an individual known as the “Trustee”, who is assigned to oversee and review the petition, ask questions of the Debtor, and conduct a due diligence investigation of the cases assigned.
At this meeting, the Trustee will ask questions of you under oath in which you are required to respond. If the Trustee finds that you have no assets, then you should receive a discharge 60 days after the meeting of creditors, if no creditors object during that period of time.
The above is designed to give you a brief summary of information and detail involved in filing for bankruptcy relief. Our job is to give you the best representation possible, while helping discharge as much debt and keep as many assets as possible under the law. Please contact us at your earliest convenience for a free personal consultation to find out the best remedy for your situation, and to discuss your available options.
I heard the laws changed a few years ago and that bankruptcy is no longer possible for most people. Is this true?
The federal government passed new bankruptcy reform legislation in October 2005. However, don’t be discouraged! Most studies indicate that the new law affects less than 15% of individuals who could have filed previously. If you are feeling overwhelmed by your debts and considering filing bankruptcy, it is highly probable that you fall into the category of the 85 percent of people who are still eligible to file.
Will I be able to rebuild my credit?
Bankruptcy laws are in place for a purpose. The laws exist to help people like you get debt relief and to begin a fresh start! Unfortunately, People commonly misconceive the effect filing for bankruptcy can have on their lives and believe they will never be able to re-establish their credit, never get a credit card again, or never buy a house. This is not the case. You can reestablish your credit after bankruptcy! Typically, you will start to receive offers for credit cards within 1 or 2 years after your filing.
Saving Your House and Your Car
Typically, Florida is regarded as one of the best states in which to file bankruptcy because it has the most encompassing list of exempt property in the country. This list includes your home and your car.
In order to keep your house and car, you must keep making the payments on your mortgage and auto loan.
Florida’s homestead exemption law allows you to keep your house, regardless of its value. These exemptions are limited to $125,000 in cases in which you have owned your home for fewer than forty months.
There are unlimited exemptions on 401Ks and pension plans, Social Security benefits and Supplemental Security Income, prepaid tuition for your children’s education, and workers’ compensation benefits. It is important to be aware, however, that bankruptcy does not discharge child support, student loans, drunk driving debts, and certain federal taxes.
Taxes and Student Loans
Most taxes are non-dischargeable, however, there are exceptions. Some federal taxes may be excepted from discharge. Income taxes under three years old are not dischargeable in bankruptcy.
Student loans generally are never dischargeable in a Chapter 7 bankruptcy but there are exceptions. We can explain the process to you and help you understand the choices that are available to you to manage your debt.