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Florida Bankruptcy FAQ
4 July 2007 (c) Howard Goldstein, Esq. , Sarasota
Florida
(941) 921-4646 howard@goldstein-pa.com
IMPORTANT: THE INFORMATION CONTAINED IN THIS FAQ IS NOT INTENDED AS
LEGAL ADVICE. THIS FAQ IS NO SUBSTITUTE FOR YOUR OWN CONSULTATION WITH
AND REPRESENTATION BY A LICENSED ATTORNEY. BANKRUPTCY MAY APPEAR TO BE
SIMPLE BUT IT IS QUITE NUANCED AND VERY FACT SPECIFIC.
HOWARD GOLDSTEIN IS NOT
YOUR ATTORNEY UNLESS YOU HAVE A WRITTEN RETAINER AGREEMENT WITH HIM.
MOST OF THE INFORMATION IN THIS
FAQ IS APPLICABLE ONLY IN FLORIDA, PARTICULARLY FOR FILINGS IN THE
TAMPA OR FT. MYERS DIVISION OF THE MIDDLE DISTRICT OF FLORIDA.
1. What is bankruptcy?
2. What is a Chapter 7
bankruptcy?
3. What is a Chapter 13
bankruptcy?
4. What is a Chapter 11
bankruptcy?
5. What is exempt property?
6. What is secured property?
7. I'm behind on my
mortgage, can I keep my house?
8. Creditors are calling
me all the time. Can bankruptcy help?
9. I've heard of
credit counseling. Can it help?
10. How does bankruptcy
affect my credit?
11. Help! I've been sued,
can I file bankruptcy and stop the state court lawsuit?
12. Who or what is the
trustee in bankruptcy?
13. What is the
difference between secured and unsecured debt?
14. Can I discharge
taxes, fines and government penalties in bankruptcy?
15. Will I owe taxes on
discharged debts?
16. Do I have to go to Court?
17. I am not a U.S.
citizen. Can I file bankruptcy in the U.S?
18. I've filed bankruptcy
on my own (pro-se) but I'm in
over my head. Can a bankruptcy attorney still help me?
1. What is bankruptcy?
Bankruptcy is the means by which you as a debtor may relieve yourself
of many kinds of oppressive unsecured debts, stop creditor harrassment,
and depending upon which chapter you file under, force a repayment
scheme on certain kinds of secured debts.
Federal law provides bankruptcy as a way for you to get a "fresh start"
in life with respect to your debts. The way is to file
bankruptcy. The Bankruptcy Code (Title 11, United States Code) is
designed to relieve you of burdensome debts by either eliminating most
of them completely (Chapter 7) or by forcing a repayment scheme
(Chapter 13 reorganization) on many kinds of creditors to help ensure
that you can remain a contributing member of society.
The etymology of the word "bankrupt" is interesting (but speculative).
It's believed that in times past, money brokers transacted their
business on tables or benches. When they couldn't pay their debts
and became insolvent or they disappeared from the scene, their benches
were broken up, or in another word, they were bankrupted.
2. What is a Chapter 7
bankruptcy?
Chapter 7 of the Bankruptcy Code is
known as a liquidation. The "deal"
in a chapter 7 is that in exchange for turning over your non-exempt
assets (if any) to the Chapter 7 Trustee who liquidates the assets and
distributes the proceeds to your creditors, you're relieved from your
dischargeable liability on the debts by way of a discharge order. A
discharge is an order entered by a U.S. Bankruptcy Court Judge that
forever prevents creditors from taking any action to collect on your
personal liabilities existing at the time you filed for bankruptcy.
Certain requirements must be met for filing in Chapter 7. You may not
be permitted to file under Chapter 7 if you have enough money after
meeting expenses to pay about 25 cents on the dollar to your unsecured
creditors. In that case a Chapter 13 bankruptcy may be
appropriate. Other requirements exist but listing them would make this
FAQ too large.
In most cases it takes 4-5 months from the time of filing until you
receive your discharge.
3. What is a Chapter
13 bankruptcy?
Chapter 13 of the Bankruptcy Code is known as a "wage earner's"
bankruptcy. It's available to most individuals, married couples, and
small businesses. Although it's called a wage earner's bankruptcy the
income needn't be wages. There must however be income in excess of
expenses in order to successfully file for Chapter 13.
Filing under Chapter 13 allows you to impose a repayment plan,
typically about 25 cents on each dollar owed to most of your unsecured
creditors (this figure may be more if you want to hold onto more
non-exempt assets) while keeping your non-exempt assets. You may
also be able to restructure past-due amounts on secured debts, force
reasonable interest rates on secured debts, and if for other than a
home you owe more than the secured property is worth, you may be able
to "strip" off the excess amount owed and pay a fraction of the excess
back in the repayment plan as an unsecured debt.
Chapter 13 is much more flexible than chapter 7 but more complicated
and takes longer to complete than a chapter 7.
4. What is a Chapter
11 bankruptcy?
When the debtor owes more than the maximum amounts that can be
supported in a Chapter 13 (contact your attorney for these figures),
Chapter 11 may be the answer. Chapter 11 is far more complex than any
of the other bankruptcy chapters. Few debtors will need to file Chapter
11, and those who will probably know it already.
5. What is exempt property?
Important: This applies only to debtors filing in
Florida
The
term "exempt" applies to certain kinds of property that can't be
reached by your creditors and therefore cannot be reached by the
trustee in bankruptcy. The extent to which your various possessions,
investments, and the like are exempt or not is critical for determing
how much of your property will have to be turned over to the trustee in
chapter 7 or paid for in chapter 13.
Exemption selection has become a bit more complicated under the 2005
BAPCA laws. This remainder of this section only applies to individuals
who've resided in Florida for two years continuously.
In Florida the most commonly used exemptions are provided by the state
Constitution and by the laws of the state. Florida has opted out of
nearly all federal exemptions.
Some frequently claimed exemptions claimed are $125,000 equity in one's
Florida homestead (unlimited if you've had an interest in the
homestead or predecessor homestead for 1,215 days or more),
$1,000 in personal property ($4,000 if no homestead exemption is
claimed or benefited from), $1,000 equity in
one vehicle owned by the debtor, certain earnings of a head of
household, and retirement accounts. Other exemptions are available;
your attorney should be consulted as this is a special topic in a
specialized practice area.
6. What is secured property?
Secured property is any kind of property in which someone other than
yourself has a "security interest." Generally speaking, a
security interest is some piece of ownership in an item of property
entitling another to claim the property if some event occurs or doesn't
occur. For example, a financed car is often secured by some
entity that can repossess the car if payments aren't made. In
this example your default on the note is the relevant event that allows
another entity to repossess the property.
7. I'm behind on
my mortgage, can I keep my house?
Maybe. Filing in either Chapter 7 or 13 may buy you some time to
come up with a plan to save the house. In Chapter 7 however the time
may be very, very short, and frankly there is little that can be done
in a 7 to save secured property (such as a mortgaged home, or a
financed vehicle) if the payments are overdue.
Chapter 13 on the other hand may allow you an extended period of time
(three years but sometimes up to five years) to repay the overdue
balance on your mortgage through the Chapter 13 repayment plan.
8. Creditors are
calling me all the time. Can bankruptcy help?
Yes. Once you have retained a bankruptcy attorney you may instruct your
creditors to call your attorney rather than you. An even bigger stick
is available once you file for bankruptcy. Once you've filed, Federal
Law prohibits creditors who know about your bankruptcy from taking any
action to collect on your personal liability for debts you've incurred
before filing. Sanctions may be available to penalize creditors
who ignore these laws; it is a rare creditor who continues to harass
debtors post-filing.
9. I've heard of
credit counseling. Can it help?
In one sense it doesn't matter. Under the 2005 BAPCA laws
individuals seeking bankruptcy relief are required to obtain
a certificate of credit counseling in the 180 days before
filing. The counseling is not much more than preparing a budget
and your attorney will do this. Your attorney however cannot
provide the required certificate.
Credit counselors sometimes use the counseling session as a marketing
device to select debtors for whom they will offer a "Debt Management
Plan" (DMP). DMPs are sometimes touted as being superior to
bankruptcy, and for the agency they are superior as the agency will
usually collect a fee either directly from the debtor or as a kickback
from certain creditors. The Internal Revenue Services has investigated
a number of these agencies for abuse of the non-profit designation,
and they have gone bankrupt themselves. An in-depth investigation of
the DMP provider you elect to use would not be unwise.
If the DMP provider is sound and legitimate it still may
not be able to help unless it can
force a settlement that you can live with upon every single one your
creditors. It may take only one non-cooperative creditor to "break"
things. You'll be depending on the voluntary cooperation of your
creditors throughout the entire process.
10. How does bankruptcy
affect my credit?
Realistically by the time most debtors realize they're not going to be
able to pay their bills their credit is usually in bad shape.
A bankruptcy remains on your credit history for ten years (more in some
circumstances). After discharge most debtors find they are able
to obtain credit again, however, the terms are usually not as good as
when they had stellar credit.
For those debtors who file under Chapter 13, during the life of the
plan they may not obtain new credit without the permission of the
Chapter 13 Trustee, which is typically not unreasonably withheld.
11. Help! I've been
sued, can I file bankruptcy and stop the state court civil lawsuit?
Filing bankruptcy will almost always stop ("stay") a state court civil
lawsuit for a time. A lawsuit related to an unsecured debt (such as
most dischargeable credit card debts) may be stopped permanently upon
filing and subsequent receipt of your discharge on the unsecured debt.
There are timing aspects to be careful of here though. If the lawsuit
proceeded to the point where a judgment was rendered then there may be
judicial liens in play. Time is of the essence in these cases.
Lawsuits related to secured debts, such as foreclosures on a home, are
stayed by the bankruptcy filing but depending upon the chapter you file
in the stay may afford only temporary relief.
12. Who or what is the
trustee in bankruptcy?
There are two kinds of trustees in Chapters 7 and 13.
The United States Trustee is a player in both sorts of bankruptcies.
The U.S. Trustee is federal appointee in the Department of Justice
charged with enforcing the bankruptcy laws. Personnel in the U.S.
Trustee's office review filings with the Bankruptcy Court for various
violations of the code, conduct investigations in cases where it
suspects violations, can bring lawsuits within the bankruptcy case
("Adversary proceedings") to force dismissal of the case or denial of
discharge, and in egregious cases where it suspects criminal laws have
been violated, refer the cases for criminal prosecution to the the
United States attorney. In typical cases the U.S. Trustee acts behind
the scenes, and most debtors will never encounter the U.S. Trustee.
Debtors filing under Chapter 7 meet a person known as the Interim
Trustee. The Interim Trustee, often but not necessarily an
attorney, is a member of a panel appointed by the U.S. Trustee, charged
with essentially the same tasks as the U.S. Trustee. However unlike the
U.S. Trustee, every debtor will encounter the Interim Trustee. He or
she is the person who conducts the Meeting of Creditors, diligently
investigates the bankruptcy filing, collects and liquidates non-exempt
assets, and where there are issues pertaining to the legitimacy of the
filing, he or she can refer cases back to the U.S. Trustee, hire other
professionals such as appraisers to verify the infomration on the
filing, and where there are contests, even hire other attorneys to
enforce the bankruptcy laws.
Debtors filing under Chapter 13 will meet an employee of the Standing
Chapter 13 Trustee's office. An employee of the the Chapter 13 Trustee
performs much of the same tasks as the Chapter 7 Trustee except for the
aspect of liquidating non-exempt assets. The Chapter 13 Trustee is
further charged with executing the confirmed chapter 13 plan, meaning
that he will collect the chapter 13 payments and distribute them in
accordance with the plan.
13. What is the
difference between secured and unsecured debt?
Simply stated, unsecured debts are debts whereby if they're not paid,
there is no specifically identified item of property for the creditor
to repossess. The distinction is far more complex than this; consult
your attorney for more information.
14. Can I discharge
taxes, fines and government penalties in bankruptcy?
Debts owed on federal taxes cannot be discharged in bankruptcy unless
they are for taxes that could have been last paid three years prior to
filing without penalty. There are other tests for dischargability as
well. Note that even though newer tax debts usually can't be discharged
in bankruptcy they may be susceptible to repayment over time in a
chapter 13 plan.
Fines and penalties are usually not dischargeable in bankruptcy.
15. Will I owe taxes
on discharged debts?
No, not if they're discharged in bankruptcy.
16. Do I have to go to Court?
Generally, no, not in court.
However in all but very rare circumstances where, for
example, there is documented medical incapacity,
almost all filers will have to appear in person at the
Meeting of Creditors or risk having their case dismissed. The Meeting
is conducted by the Chapter 7 or Chapter 13 Trustee in Tampa near the
Federal Courthouse or in Ft. Myers inside of the courthouse but not in
a courtroom. (In fact the Bankruptcy Code prohibits the bankruptcy
Judge from participating in the Meeting).
There are unusual circumstances where further appearances are required
or would be to your advantage. You should consult with your attorney to
discuss these circumstances.
17. I am not a
U.S. citizen. Can I file bankruptcy in the U.S?
Yes, provided you have a domicile, place of business, or property in
the U.S. But note that there may be certain complications regarding claims of
exemptions by undocumented immigrants.
18. I've filed
bankruptcy on my own
(pro-se)
but I'm in over my head. Can a bankruptcy attorney still help me?
Many bankruptcy attorneys will agree to
take over cases originally filed pro-se.
Contact a bankruptcy attorney to discuss the details of your case.
IMPORTANT: THE INFORMATION CONTAINED IN THIS FAQ IS NOT INTENDED AS
LEGAL ADVICE. THIS FAQ IS NO SUBSTITUTE FOR YOUR OWN CONSULTATION WITH
AND REPRESENTATION BY A LICENSED ATTORNEY. BANKRUPTCY MAY APPEAR TO BE
SIMPLE BUT IT IS QUITE NUANCED AND VERY FACT SPECIFIC.
HOWARD GOLDSTEIN IS NOT
YOUR ATTORNEY UNLESS YOU HAVE A WRITTEN RETAINER AGREEMENT WITH HIM.
MOST OF THE INFORMATION IN THIS
FAQ IS APPLICABLE ONLY IN FLORIDA, PARTICULARLY FOR FILINGS IN THE
TAMPA OR FT. MYERS DIVISION OF THE MIDDLE DISTRICT OF FLORIDA.
The hiring
of a lawyer is an important decision that should not be based solely
upon advertisements. Before you decide, ask the lawyer to send you free
written information about the lawyer's qualifications and experience.
howard@goldstein-pa.com
