1710 Shadowood Lane, Suite 210, Jacksonville, Florida 32207
FREE CONSULTATION 904-391-0030 FREE CONSULTATION 904-391-0030

Bankruptcy Law FAQs

 

Chapter 7, 11 & 13 Bankruptcy Frequently Asked Questions

Below are questions frequently asked by individuals considering filing for bankruptcy. The responses are intended to provide you with a general understanding of various events occurring during the bankruptcy process. You should consult your attorney before taking any action regarding these matters.

General Bankruptcy FAQs

Are certain debts non-dischargeable?

Yes. The most common non-dischargeable debts are alimony, child support, certain property settlement agreements, certain income tax liabilities, Department of Revenue sales tax liability, Internal Revenue Service pay roll tax liability or trust fund liability, and many student loans. In addition, certain debt created by fraud, embezzlement, or conversion can be found to be non-dischargeable.

Do I have to list all of my creditors?

Yes. Bankruptcy law requires a full and complete disclosure of all debts owed. Bankruptcy schedules are signed under the penalty of perjury and the debtor will be asked under oath at the meeting of creditors if all debts were disclosed.

Can I transfer ownership of my home, car, boat, collectibles, tools, etc. to someone else to keep those items out of bankruptcy?

No. Such transfers will almost invariably violate Florida’s fraudulent transfer statute and 11 U.S.C. §548 of the federal Bankruptcy Code. A Chapter 7 debtor who has been found guilty of such transfers may lose his entire discharge. In addition, the debtor may be subjected to criminal prosecution. A trustee has the power to set these transfers aside. The trustee can also ask for the case to be dismissed for a bad faith filing. Moreover, federal law could be invoked to initiate criminal proceedings based on bankruptcy crimes.

Are NSF (non-sufficient funds) checks dischargeable in bankruptcy?

Often, the answer is yes because creditors usually elect not to go through the expense of challenging it under federal law. However, bankruptcy does not prevent the creditor from trying to get the State Attorney’s Office to threaten prosecution to force restitution on the NSF checks.

Are certain debts dischargeable in Chapter 13 that are not dischargeable in Chapter 7?

Yes. Credit card fraud, embezzlement, larceny, defalcation, conversion, and certain IRS debt owed by non-filers can be discharged in Chapter 13 bankruptcy. Alimony, child support, student loans, personal injury in DUI cases and certain IRS debt are not dischargeable in either Chapter 7 or Chapter 13.

Will my credit union or bank close my bank accounts if I file bankruptcy?

It depends. If a credit union is going to sustain a loss, most credit unions will ask the customer to leave the credit union. However, if the debtor reaffirms the debt to the credit union, the credit union usually will not ask the debtor to leave the credit union. Most banks will not take such action. This situation should be discussed with your attorney.

Will my bankruptcy affect a co-signer on the debt?

Yes. The bankruptcy will not protect the non-filing co-signer. The creditor may continue to try to collect against the co-signer. Creditors have this right even if the bankruptcy is never filed. Additionally, the co-signer’s credit bureau report will almost always show the joint debt was included in bankruptcy. These situations should be discussed with your attorney.

Can my employer fire me for filing bankruptcy?

No. Federal law 11 U.S.C. §525 is the anti-discrimination section of the Bankruptcy Code that precludes a public or private employer from discriminating against any employee solely because he or she filed for bankruptcy. Employers almost always honor this section and there are remedies if they try to violate it.

How long does bankruptcy remain on my credit bureau report and can I obtain credit before that time period runs?

A bankruptcy can be kept in the public records section of your credit bureau report for 10 years. Once your discharge is entered, if certain income and employment conditions are met, new automobile financing is immediately available at most car dealerships in Jacksonville. If certain conditions are met, new mortgage financing may be available after discharge with a substantial down payment. VA and FHA financing becomes available two years after discharge. Credit card solicitations usually begin almost immediately after discharge.

What is credit counseling and must I take it?

To be eligible to file a personal bankruptcy, all debtors must undergo credit counseling from an approved credit counseling agency. The course usually lasts about one hour and costs about $50.00. Upon completion of the course, the debtor will be issued a credit counseling certificate. This course is required to be taken in order to be able to file bankruptcy. If a debtor files bankruptcy without taking the course, the case will be automatically dismissed.

What is financial education and must I take it?

To be eligible for a bankruptcy discharge, all debtors must take a financial education course from an approved provider. The course usually lasts two hours and costs about $50.00. The course cannot be taken until after your bankruptcy has been filed and you have been assigned a case number. Upon completion of the course a certificate will be issued to you. The certificate must be filed with the bankruptcy court before your projected discharge date. If you become eligible for discharge and have not completed the course and filed the certificate with the court, your case may be closed without a discharge being issued. You must then pay to have your case re-opened for the sole purpose of filing your certificate of financial education completion.

Is there life after bankruptcy?

Absolutely. Credit can be re-established and should be used discreetly and only as reasonably necessary. Our firm conducts a Life After Bankruptcy workshop free of charge to the firm’s clients.

Can a Christian file a bankruptcy and not violate scriptural principles?

Of course, we are to do everything in our power to meet our obligations and fulfill our promises to pay, so bankruptcy should never be the first option…(click here to read the complete answer)

Back to Top

 

Chapter 7 FAQs

What is a discharge?

A Chapter 7 discharge is an order signed by the bankruptcy judge declaring all of your eligible debt to be discharged. The Order of Discharge creates a permanent injunction against a creditor whose debt is discharged from attempting to collect the debt from you. The Order of Discharge is normally entered about 110 days after the Chapter 7 case is filed. Your attorney should discuss with you what debts cannot be discharged.

What is a Chapter 7 trustee?

In the Jacksonville Division of the Middle District, there is a panel composed of eight different Chapter 7 trustees. It is a blind draw as to which trustee from the panel will be assigned to any given case. Each of the eight Chapter 7 trustees have significant experience in bankruptcy law. It is the trustee’s responsibility to examine the debtor under oath and to review the paperwork filed with the court. It is the Chapter 7 trustee’s responsibility to convert the non-exempt assets of the debtor into money. After administrative expenses are paid, the remaining money is distributed to the creditors according to the Bankruptcy Code. Your attorney will explain your exemptions to you.

What is a meeting of creditors and what happens there?

The meeting of creditors is a scheduled meeting conducted by the Chapter 7 trustee where the debtor is examined under oath concerning his assets and debts. Creditors who choose to attend the meeting, either in person or through their attorney, can ask questions relevant to the case. As a practical matter, creditors rarely attend the meeting of creditors. The average meeting of creditors lasts about three to five minutes and is held approximately 40 days after the Chapter 7 bankruptcy petition is filed. It is mandatory for all debtors to attend the meeting of creditors. Your attorney will accompany you to the meeting.

What is a Reaffirmation Agreement?

Because most debt is discharged in a bankruptcy action, mortgage companies and car, furniture, and appliance financers typically want the debtor to sign a document known as a Reaffirmation Agreement. Signing this agreement removes the asset from the bankruptcy and the debtor agrees to continue to pay for the asset as if the bankruptcy had never been filed.

This allows the debtor to keep his home, car or furniture. The decision whether or not to reaffirm a debt is a serious one and needs to be discussed with your attorney so that all options are understood. If the debtor stops paying on the asset after a Reaffirmation Agreement is signed, then the asset can be foreclosed or repossessed and a deficiency judgment obtained for the difference outside of the bankruptcy. If a debtor changes his mind and wishes to terminate or rescind a Reaffirmation Agreement, then the debtor has 60 days to file a rescission agreement after a Chapter 7 reaffirmation is fully executed and filed with the bankruptcy clerk’s office. You should consult your bankruptcy lawyer before making any decisions regarding reaffirmation.

What are exemptions?

Certain assets owned by the debtor have what is known as an exempt status. This means the debtor can protect them from the reach of creditors and the Chapter 7 trustee. The exemption will not apply to a mortgage or lien voluntarily placed on the asset by the debtor. The availability of exemptions and how to properly and effectively claim them should be discussed with your attorney.

What is a redemption?

In Chapter 7, if an asset is exempt, it can be purchased or redeemed from the creditor by paying its present market value. The trustee assigned to your case may require this amount to be paid in a single lump sum, or allow monthly payments over a limited time period. The balance of the debt over the present market value of the property will be discharged. An example would be furniture that has a depreciated value at the time of bankruptcy of $700 and the balance of the debt on the furniture is $2,000. The furniture can be redeemed for $700 and the $1,300 difference is discharged. The process of redeeming assets should be discussed with your attorney.

Are certain debts non-dischargeable?

Yes. The most common non-dischargeable debts are alimony, child support, certain property settlement agreements, certain income tax liabilities, Department of Revenue sales tax liability, Internal Revenue Service pay roll tax liability or trust fund liability and many student loans. In addition, certain debt created by fraud, embezzlement or conversion can be found non-dischargeable. The dischargeability of some debts is a fact specific inquiry and should be discussed with your attorney.

Are NSF checks dischargeable in Chapter 7?

Then, the answer is yes because creditors usually elect not to go through the expense of challenging bounced checks in federal court. However, bankruptcy does not prevent the creditor from trying to get the State Attorney’s Office to threaten prosecution to force resolution on NSF checks.

Can creditors ask to have their debt held non-dischargeable?

Yes. Creditors have approximately 100 days after the filing of the Chapter 7 bankruptcy case to file a lawsuit asking that the debt be held non-dischargeable. Certain debts have no such time limitation.

Do I have to list all of my assets and creditors?

Yes. Bankruptcy law requires a full and complete disclosure of all the debtor’s assets and of any person or entity whom the debtor owes money. Bankruptcy schedules are signed under the penalty of perjury and the debtor will be asked under oath at the meeting of creditors if all assets and debts were disclosed.

Can I transfer ownership of my home, boat, collectables, tools, etc. to someone else to keep those items out of bankruptcy?

No. Such transfers within two years of filing Chapter 7 will almost invariably violate Florida’s fraudulent transfer statute and 11 U.S.C. § 548 of the federal Bankruptcy Code. A debtor who has been found guilty of such transfers may lose his entire discharge and be subject to criminal prosecution.

Can the trustee or a creditor object to my Chapter 7 discharge?

Yes. Objection to discharge is controlled by federal law. If an objection is made and the court sustains the objection, all of the debts owed by the debtor can never be discharged in bankruptcy. This issue generally comes into play where the debtor has transferred an asset within two years (and in some cases four or ten years) of filing bankruptcy with the intent to inder, delay or defraud creditors or the Chapter 7 trustee. This can also happen if the debtor is unable to give a reasonable explanation for the reduction in assets occurring shortly prior to bankruptcy. Not having sufficient records to satisfactorily explain the debtor’s financial position or change in position can also serve as a basis to object to discharge.

What is involved in a buy-back from the Chapter 7 trustee?

In some of the cases involving assets, the trustee will hire an appraiser to appraise the debtor’s assets. A copy of the appraisal will be provided to the debtor and the debtor’s counsel. Negotiations will follow concerning whether the value of the assets have exceeded the exemptions allowed by state and federal law. If the value of a particular asset exceeds your allowed exemption, you may be able to buy-back the asset by paying the trustee the non-exempt amount. Depending on which trustee is assigned to your case, the approach on the buy-back may differ somewhat. Other differences may involve the length of time for the buy-back to be paid and how the buy-back amount is calculated. Your attorney will negotiate the buy-back for you.

Can one spouse file for Chapter 7 bankruptcy without the other spouse filing?

Yes. For example, our firm makes it a practice to pull three-way merged credit bureau reports on both husband and wife in order to advise our clients as to who should or should not file in the bankruptcy court. Your attorney will explain your options.

Will by bankruptcy affect a co-signer on my debt?

Yes. The bankruptcy will not protect a non-filing co-signor. The creditor may continue to try to collect against the co-signor, a right creditors have even outside bankruptcy. Additionally, the co-signor’s credit report will almost always show the joint debt was included in a bankruptcy.

Will my credit union or bank close my accounts if I file bankruptcy?

It depends. If a credit union anticipates taking a loss as a result of your filing, most will ask the customer to leave the credit union. However, if the debtor reaffirms the debt to the credit union, the credit union will not take such action. Most banks will not take such actions. However, other problems need to be considered, such as the financial strain placed on the debtor by reaffirming debt.

Can my employer fire me for filing bankruptcy?

No. Federal law 11 U.S.C. § 525 prohibits employers, both private and public, from discriminating against any employee because of a bankruptcy filing. Employers almost always honor this section and there are legal remedies if they try and violate it.

How long does a bankruptcy remain on my credit report and can I obtain credit before that time period runs?

A Chapter 7 bankruptcy can be kept in the public records section of your credit report for 10 years. Once your Chapter 7 discharge is entered, if certain income and employment conditions are met, new automobile financing is available at most new car dealerships in Jacksonville. If certain other conditions are met, new mortgage financing is usually available after discharge with 15% down payment available. VA and FHA financing becomes available after two years after discharge. Credit card solicitations will begin almost immediately after discharge.

What happens if I inherit something after filing for a Chapter 7 bankruptcy?

If there is a death within 180 days of you filing a Chapter 7 bankruptcy, any inheritance or life insurance that you receive will come under the control of the Chapter 7 trustee and will be used to pay your creditors. If you anticipate a death within this period, you should discuss the situation with your attorney.

If I filed a Chapter 7 in the past, how long before I am eligible to file another Chapter 7?

Under the law that went into effect in October 2005, a debtor who previously received a Chapter 7 discharge is not eligible to receive another Chapter 7 discharge until eight years have passed from the date of filing the previous case.

Is there life after bankruptcy?

Absolutely. If you take the right steps to actively rebuild your credit after your discharge, your post-bankruptcy credit score will likely exceed your pre-bankruptcy credit score within two years. Our firm offers a Life After Bankruptcy class to our clients free of charge. Life After Bankruptcy explains how to take the correct steps in rebuilding your credit after your discharge and teaches you how to avoid many creditor traps and pitfalls.

Back to Top

Chapter 13 FAQs

What role does the Chapter 13 trustee play in the case?

The Chapter 13 trustee performs many roles. The trustee serves as a disbursing agent for payments under the plan. The trustee examines the debtor at the meeting of creditors and is actively involved with the certification of your plan. The trustee can also object to confirmation of the plan and makes a determination in each case whether the debtor has satisfied the disposable income test, the means test, and the best interest of creditors test. If one or more of these tests are not satisfactory, it is the trustee’s duty to object to confirmation. The trustee can also file a motion to dismiss the Chapter 13 case for a bad faith filing or for failure to make payments called for by the plan.

What is the disposable income test in Chapter 13?

In some cases the debtor must commit all of his net take-home pay to the plan for the life of the plan. In practice, this means that the plan payment plus reasonable and necessary living expenses must account for all the net take-home pay. If there is any net take-home pay leftover the extra income is dedicated to the unsecured creditors. If the unsecured creditors are paid in full, the disposable income test does not come into play in most cases. Your disposable income should be calculated by your attorney prior to filing your plan.

What is the best interest of creditors test in Chapter 13?

This test requires the debtor to make sure that under the Chapter 13 plan, the unsecured creditors receive at least as much under Chapter 13 as they would receive if the case were handled under Chapter 7. This involves completing a liquidation analysis to determine what the unsecured creditors would receive under Chapter 7. The Chapter 13 Plan must provide at least that much to the unsecured creditors. This analysis should be completed by your attorney.

Are certain debts dischargeable in Chapter 13 that are not dischargeable in Chapter 7?

Yes. Credit card fraud, embezzlement, larceny, defalcation, conversion, and certain IRS debt owed by non-filers can be discharged in Chapter 13. Alimony, child support, student loans (most, but not all), personal injury in DUI cases and certain IRS debt is not dischargeable in a Chapter 13.

Will my credit union or bank close my accounts if I file Chapter 13?

It depends. If a credit union anticipates taking a loss as a result of your filing, most will close your account and ask you to leave the credit union. This often occurs when there is a signature loan, credit card debt or an unsecured debt created after an automobile is valued down in a Chapter 13. This situation needs to be discussed with your attorney. Banks normally do not make you close out your account unless you have a long history of NSF checks.

What effect will a Chapter 13 have on a co-debtor who does not file bankruptcy?

The Chapter 13 will show-up on the non-filing co-debtors credit bureau report alongside of the joint debt. It won’t show in the public records section. If it is not a consumer debt or if it is a consumer debt but will not be paid in full under the Chapter 13 plan, the creditor may proceed against the non-filer. What is a co-debtor stay? If the joint debt is a consumer debt and the plan proposes to pay the debt in full, the creditor is blocked by the Chapter 13 filing from taking collection action against the non-filing co-debtor.

<!—

What is a co-debtor stay?

If the joint debt is a consumer debt and the plan proposes to pay the debt in full, the creditor is blocked by the Chapter 13 filing from taking collection action against the non-filing co-debtor.

—>

Are NSF checks dischargeable in Chapter 13?

Often, the answer is yes because creditors usually elect not to go through the expense of challenging bounced checks in federal court. However, bankruptcy does not prevent the creditor from trying to get the State Attorney’s Office to threaten prosecution to force resolution on NSF checks.

Do I have to list all of my assets and creditors?

Yes. Bankruptcy law requires a full and complete disclosure of all the debtor’s assets and of any person or entity whom the debtor owes money. Bankruptcy schedules are signed under the penalty of perjury and the debtor will be asked under oath at the meeting of creditors if all assets and debts were disclosed.

Can I transfer ownership of my home, boat, collectables, tools, etc. to someone else to keep those items out of bankruptcy?

No. Such transfers will almost invariably violate Florida’s fraudulent transfer statute and 11 U.S.C. § 548 of the federal Bankruptcy Code. The Chapter 13 trustee has the power to set these transfers aside. The trustee can also asked for the case to be dismissed for a “bad faith filing.” Moreover, federal law could be invoked to initiate criminal proceedings based on bankruptcy crimes.

Can only one spouse file a Chapter 13 and stop foreclosure on a house owned by both spouses?

Yes. This occurs quite frequently. If one of the spouses does not need to be in bankruptcy other than for the foreclosure, then that particular spouse can be left out of the bankruptcy. There may be benefits to one spouse filing a Chapter 7 and the other spouse filing a Chapter 13. For example, this permits the spouse filing Chapter 7 to obtain automobile or other financing sooner. Of course, this type of bankruptcy planning should be discussed at length with your attorney.

Can my employer fire me for filing bankruptcy?

No. Federal law 11 U.S.C. § 525 prohibits employers, both private and public, from discriminating against any employee because of a bankruptcy filing. Employers almost always honor this section and there are legal remedies if they try and violate it.

What is the meeting of creditors and what happens?

The meeting of creditors is a scheduled meeting conducted by the Chapter 13 trustee where the debtor is examined under oath concerning his assets and debts. Creditors who choose to attend the meeting either in person or through their attorney can ask questions concerning anything relevant to the case. As a practical matter, creditors rarely attend the meeting of creditors. The average meeting of creditors lasts about three to five minutes and is held approximately 40 days after the Chapter 13 bankruptcy petition is filed. It is mandatory for all debtors to attend the meeting of creditors. An attorney will accompany you to the hearing.

When is the first plan payment due, who gets paid, and how are the payments made?

The first payment is due 30 days after the plan is filed. The payment is made by cashiers check or money order payable to the Chapter 13 trustee. The debtor’s name and case number must appear on the face of the check or money order. The trustee will provide you with the payment details and a coupon book prior to the first payment.

Can I obtain credit while I am making payments on my Chapter 13 plan?

You must obtain permission from the Chapter 13 trustee or the court to incur new debt while you are in a Chapter 13 bankruptcy. It is difficult to get the trustee or the court to approve new credit until the plan is confirmed, which normally occurs two to three months after the case is filed. Even after confirmation, the procedure requesting the trustee or court approval is quite cumbersome: the trustee has a form that must be filled out and a current income and living expense analysis must be provided along with a copy of the financing arrangement for which approval is being sought. This also assumes that a lender has been found who is willing to loan money to an individual in a Chapter 13 bankruptcy.

Can the trustee or a creditor object to confirmation of a Chapter 13 Plan?

Yes. It is the trustee’s responsibility to object to Chapter 13 plans that are deficient. A creditor may also object, but generally most objections will come from the Chapter 13 trustee. Most objections are worked out or resolved prior to the confirmation hearing but occasionally the court has to take evidence and issue a ruling.

What happens if I inherit something during the three to five years that I am paying creditors under my Chapter 13 plan?

The inheritance is considered income and must be turned over to the Chapter 13 trustee to be distributed to the unsecured creditors up to the extent of the allowed unsecured claims. If the potential exists for this to occur, you need to discuss the matter with an attorney to look at some options.

What happens to my yearly tax refund during my Chapter 13 plan?

Your tax refund is considered income, therefore any refund you receive will most likely be turned over to the trustee. However, your attorney will discuss some options which will minimize the impact on your finances.

When do I get my discharge?

After completion of the payments under the Chapter 13 Plan that has been confirmed by the Bankruptcy Court. Normally, this will be a three year, four year, or five year plan.

If my Chapter 13 does not work, can I convert the case to Chapter 7?

Yes. If the Chapter 13 plan cannot be amended to handle changes in your financial affairs, you may find it advisable to convert to Chapter 7. You should consult your attorney before taking any such action.

How long will a Chapter 13 remain on my credit report?

Ten years. However, you will begin re-establishing your credit after the discharge and will likely have higher credit two years after you discharge than you had prior to filing.

What if I previously filed a Chapter 13 but my case was dismissed — can I file another Chapter 13?

Under the new Bankruptcy laws that went into effect in October 2005, if you have had a case pending within the 12 months of filing a new case, the automatic stay, which stops your creditors from taking actions to collect on your debts (i.e. foreclosure, repossession), is only in effect for 30 days. Within 30 days you must attend a hearing in front of a bankruptcy judge to explain why your previous case was dismissed and why your new case will be successfully completed. The court will determine whether or not to extend the automatic stay. However, if there are special circumstances which the court should be made aware of, we may be able to file an adversary proceeding in which we will be given the opportunity to explain your circumstances to the court and the court will decide whether or not to impose the stay.

Is there life after bankruptcy?

Absolutely. If you take the right steps to actively rebuild your credit after your discharge, your post-bankruptcy credit score will likely exceed your pre-bankruptcy credit score within two years. Our firm offers a Life After Bankruptcy class to our clients free of charge. Life After Bankruptcy explains how to take the correct steps in rebuilding your credit after your discharge and teaches you how to avoid many creditor traps and pitfalls.

Back to Top