IS BANKRUPTCY RIGHT FOR YOU?
Bankruptcy is not the answer to all debt problems but it could be the answer to your problems. Life happens and, often, circumstances out of your control create an unbearable financial burden for you, whether it be a job loss, decreased hours at work, an unexpected large and necessary expense, medical issues, or out-of-control credit card debt. It is not unusual for people to use the credit cards they have to buy groceries, gas, medicine and other necessaries when there is an interruption in their usual income.
The purpose of Bankruptcy is to allow you to address your debts and obtain a fresh start. Depending upon the amount and type of debt you have, your income, your assets and your objective. This is a decision best made after discussing your financial situation with a bankruptcy attorney.
Chapter 7 Bankruptcy, a bankruptcy intended especially for consumer debt, can provide the type of relief you need from the burden of accumulating debt. Although filing will cause a drop in your credit rating, allowing unpaid debts to languish on your credit reports will continue to decrease your credit score; filing Bankruptcy creates a stopping point from which your credit score may continue to increase if you follow good financial management.
Once you have signed your Retainer Agreement with the Law Office of Heather A. Harwell, P.A. and made your first payment, you may advise your creditors that you are filing bankruptcy and direct them to contact our office. They may still pursue actions against you but most will not. However, once your bankruptcy petition is filed, the following types of court actions will be automatically stayed (stopped) until the bankruptcy closes or the bankruptcy judge renders an order upon motion to allow a party relief from the stay:
Mortgage foreclosure actions;
Deficiency collection actions;
Debt Collection against you;
Debt Collection by you;
Family law cases with regard to debt or property distribution (time-sharing, paternity and support issues may continue to be litigated);
Personal injury lawsuits;
Any civil suit seeking to collect damages from you;
Any civil suit in which you are seeking to collect damages from another; and
Appeals regarding any action listed in numbers 1 through 11.
Bankruptcy will also stop your credit from continuing to plummet due to late payments and collection activities. Once you file, your credit may decrease more, but your credit will begin to increase again after discharge if you follow good credit management rules. Discharge of your debts may provide the fresh start you needed to get back on track.
Congress passed the Bankruptcy Abuse Prevention & Consumer Protection Act in 2005 which now requires that consumers must apply a Means Test to determine their ability to pay debts. The test compares your gross income averaged over the past 6 months to the median income of families the same size as yours in Florida. Additionally, consumer debtors now need to take a pre-filing credit counseling course and post-filing debt management course.
The MEANS TEST. The "Means Test" is a calculation based upon your average gross income from the six (6) months immediately prior to filing. The types of income that are included in determining your monthly income are as follows:
wages; alimony; regular contributions received for household expenses; gross income from business, profession or farm; rents and other income from real property; interest, dividends and royalties; unemployment compensation; pension and retirement income; gifts and inheritances received during the 6 month period; tax refunds; proceeds from a lawsuit; and gambling winnings.
CHAPTER 7 LIQUIDATION. Chapter 7 liquidates your debts so that you need not continue to pay them. You may included unsecured credit card debt, medical bills, signature loans, judgments and secured debts to the extent that you do not wish to keep the collateral. The following debts, however, may not be discharged:
alimony; child support; most debt obligations pursuant to marital settlement agreements or divorce decrees; bank overdraw fees; cash advances totaling more than $750 within 70 days prior to discharge; consumer debts of more than $500 for luxury goods or services incurred wthin 90 days prior to discharge; court ordered fines and restitution related to criminal proceedings; HOA or COA fees accrued after filing; federally backed student loans except if an undue hardship may be proven, fines, forfeitures and penalties payable to or for a governmental unit; most tax debts; funds obtained wrongfully through fraud, larcency, embezzlement or misappropriation while acting in a fiduciary capacity; loans, moneys, extension of credit obtained fhrough fraud or misreprentation; personal injury or death damages caused while driving under the influence of drugs, alcohol or other substances; personal injury or property damages damages caused willfully or maliciously; and loans from retirement plans, 401-k's, pension plans, thrift savings plans or stock bonus accounts.
All your debts must be listed and you may not elect to, for example, keep a credit card out for future use. If you wish to keep items of collateral such as your house or car, that secure a loan, there are a few options that you have to make this happen in a Chapter 7 Bankruptcy. In Florida, Chapter 7 allows exemptions for your home, $1000 toward the equity in your car, $1000 toward your personal property if you elect to exempt your home or $4000 toward your personal property if you are renting or otherwise choose not to claim a homestead exemption. There are several other exemptions as well.
CHAPTER 13 REORGANIZATION.
Chapter 13 Bankruptcy is a reorganization plan which allows individuals with regular income to pay all or part of their debts in installments over a period of time between 3 and 5 years. You are only eligible for chapter 13 if your debts do not exceed certain dollar amounts set forth in the Bankruptcy Code which change every 3 years. Until April 1, 2019, the limit for unsecured debt is $394,725 and $1,184,200 for secured debt. Under chapter 13, you must file with the court a plan to repay your creditors all or part of the money that you owe them, using your calculated disposable future income. Your disposable income is determined by the Means Test and what you think is your disposable net income is often much less than what is determined by the Means Test. You are required to apply all of your disposable net income to your unsecured creditors. This requirement often makes compliance with the requirements of the Plan very difficult. The court must approve your plan before it can take effect. After completing the payments under your plan, your debts are generally discharged except for those that may not be discharged, including the following:
SSI and SSD income is NOT included in your average. Your averaged gross income is then compared to the average median income of a household the same size as yours. If your average gross income is equal to or less than the median family income, you qualify to file Chapter 7. If your income exceeds the average median income, you will need to provide more detailed information regarding your expenses to complete the second part of the test. If you complete the second part of the Means Test and your income is still too much, you will need to consider a Chapter 7 Bankruptcy. If your disposable income indicated by the Means Test over the next 60 month is enough to pay at least 25% of your debts, you cannot file under Chapter 7.
The BANKRUPTCY PROCESS. Bankruptcy is a process, whether you are filing for Chapter 7 or Chapter 13 and discharge is not guaranteed. This is why you need an attorney to help you through the process and answer the many questions that will arise. Your bankruptcy will be different from every other bankruptcy because no two financial situations are the same. Your attorney can help to identify issues that may arise for you in your bankruptcy before they occur and may be able to help you avoid certain issues that tend to arise in bankruptcies.
1. You will gather documents and answer a detailed financial questionnaire which you will then give to your attorney.
2. You will take a pre-filing credit counseling course and provide the certificate to your attorney.
3. The attorney will use your documents and information to prepare your petition package which averages about 60 pages.
4. You will review the petition package to make sure it is accurate. Once this is confirmed, you will sign it and your attorney will file.
5. Within about 3 days of filing, the Bankruptcy Court will issue an order which schedules a 341 "Creditor's Meeting" about 30 days out.
6. Your attorney may request updated documents to provide to the trustee along with other "compliance" documents from the documents you have already provided.
7. You will attend the required 341 Creditor's meeting where the trustee and sometimes creditors will ask you detailed questions about your documents filed and your financial status.
8. The trustee will file a notice after the meeting advising whether he or she believes you have non-exempt assets that may be distributed to your creditors or not and also whether there is a "presumption of abuse" or not. If there is not, you qualify for Chapter 7. If the determination presumes abuse, there may be some litigation required which would delay the process or result in a dismissal.
9. If the trustee needs to collect non-exempt assets, this may delay the bankruptcy process. When you are determined to have non-exempt assets, this is considered an "overage". Usually, the trustee will allow you to "buy back" the asset effected by the overage or otherwise make a payment to the trustee. This is not something that can be broken into several payments. Sometimes, a tax refund may result in an overage, even if you have spent it before filing.
10. If there are no issues with your bankruptcy, you may receive a discharge about 90 days later and then the case will be closed about 10 days after the discharge.
You may currently complete a
Chapter 7 Bankruptcy
with no physical contact required
alimony; child support; most debt obligations pursuant to marital settlement agreements or divorce decrees; bank overdraw fees; cash advances totaling more than $750 within 70 days prior to discharge; consumer debts of more than $500 for luxury goods or services incurred wthin 90 days prior to discharge; court ordered fines and restitution related to criminal proceedings; HOA or COA fees accrued after filing; federally backed student loans except if an undue hardship may be proven, fines, forfeitures and penalties payable to or for a governmental unit; funds obtained wrongfully through fraud, larcency, embezzlement or misappropriation while acting in a fiduciary capacity; loans, moneys, extension of credit obtained fhrough fraud or misreprentation; personal injury or death damages caused while driving under the influence of drugs, alcohol or other substances; personal injury or property damages damages caused willfully or maliciously; and loans from retirement plans, 401-k's, pension plans, thrift savings plans or stock bonus accounts.