Do I need to file for bankruptcy, and what happens if I do?
Our St. Petersburg-based bankruptcy law firm hears from people on a daily basis who have the misfortune of having to consider filing for bankruptcy relief. Here are some “Frequently Asked Questions” that you may find helpful and have probably thought about asking a bankruptcy lawyer.
What are the different kinds of bankruptcy?
Generally speaking, individuals and married couples consider filing a “straight bankruptcy” under Chapter 7 bankruptcy, or a “repayment plan” under Chapter 13 bankruptcy. A Chapter 7 case is often more advantageous because it does not involve repayments to creditors and usually results in a discharge of indebtedness within four months. However, a major feature of the change in the bankruptcy laws in 2005 imposed an income requirement to qualify for a Chapter 7 bankruptcy.
On the other hand, there are a number on reasons why a Chapter 13 bankruptcy may be necessary or appropriate, including: too much income, preventing qualification for Chapter 7 bankruptcy; assets which may be lost in a Chapter 7 “liquidation”; reinstatement of delinquent mortgage or other secured debt, such as car payments; payment of back taxes through a court-supervised plan; and the possible “stripping” of a second mortgage.
The decision to file any sort of bankruptcy, and the selection of the type of bankruptcy, should be carefully considered upon consulting with a bankruptcy attorney, you should be thorough in disclosing all possible pertinent information to your attorney in order to get the best possible recommendation.
Do I have to list all of my debts?
Yes. However, secured debt such as mortgages or car loans are often “re-affirmed,” which means that the debt is taken out of the bankruptcy for all intents and purposes. The name of the game in bankruptcy is “full disclosure”. If you wish to receive the benefits of bankruptcy protection, you have an absolute duty to truthfully disclose all of your liabilities and assets. Our bankruptcy lawyer can assist you in this process to ensure that you are disclosing all that is required.
Can I keep my house in bankruptcy?
Generally speaking, yes. However, the mortgage lien survives after the bankruptcy and if the mortgage is not paid according to its terms, it can be foreclosed. Just as the homestead is exempt from claims of creditors (except for valid mortgages, taxes or construction liens), the homestead is exempt from administration in bankruptcy.
Will my student loans or IRS debt be discharged in bankruptcy?
Generally not. These are the most common forms of “non-dischargeable debt”. Student loans are dischargeable only if repayment of any reasonable portion thereof would be an “undue hardship,” and this requirement is very strictly construed. IRS debt may be dis-chargeable under very limited circumstances which should be reviewed carefully with an experienced bankruptcy lawyer.
What if I filed bankruptcy in the past?
If there was a prior Chapter 7 discharge, a subsequent Chapter 7 must be filed at least eight (8) years after the filing of the previous case in order to receive a discharge. However, if there was a prior Chapter 7, a Chapter 13 may be filed four (4) years after the receipt of a Chapter 7 discharge. If there was a prior Chapter 13, another Chapter 13 may be filed two (2) years after the prior discharge.
I have a business. Can I file bankruptcy?
That depends on a great number of factors. Business entities such as a corporation, limited liability companies (LLC), or partnerships are considered separate legal entities, and as such may file a Chapter 7 liquidation bankruptcy or a Chapter 11 business reorganization, separately from their owners. A Chapter 7 business bankruptcy is appropriate when the business is going to be closed. A Chapter 11 Bankruptcy is generally complex and expensive, but is useful for a small business that has a reasonable chance for survival. These separate entities cannot file a Chapter 13 Bankruptcy.
What is the general process?
Once all of the information is received, the paperwork is prepared, including a list of all of your assets, liabilities, income, expenses and certain financial background. The Petition and Schedules are signed by the Debtor and filed with the Bankruptcy Court. At that moment, the Debtor(s) is/are under Bankruptcy Court protection, and all collection action must stop. This is called the “automatic stay”. About thirty days after the filing, the Debtor(s) must appear before a Bankruptcy Trustee to answer relevant questions regarding the case, confirm the accuracy of the information provided in the paperwork, and confirm the propriety of the filing of the bankruptcy. This is called the “Creditors Meeting”, but creditors rarely show up. If creditors do show up, they do have the opportunity to ask brief, relevant questions. This is not a court appearance, but it is a proceeding which is recorded and involves sworn testimony. Usually the Creditors Meeting takes no more than ten to fifteen minutes. In a Chapter 7 case, a discharge is generally issued approximately two and a half months after the conclusion of the Creditors Meeting and the case is closed. There may be assets to administer or other legal matters which could keep a case open until the matters are resolved. In a Chapter 13 case, the court will consider the confirmation of the Chapter 13 repayment plan, usually within two to six months after meeting with the Trustee. The Debtor generally does not have to appear at the Confirmation Hearing. Payments to the Chapter 13 Trustee begin thirty (30) days after the case is filed and continue for the life of the Plan, which is generally between three and five years. The approval of the Plan is up to the court and payments may go up and down, depending upon creditors’ claims or other factors.
Is there financial “Life After Bankruptcy”?
Yes. Most people can begin to rebuild their credit within a reasonable time after a bankruptcy. In the past, mortgages were generally obtainable about two years after a bankruptcy discharge, and car loans were usually obtainable more quickly. Credit cards with reasonable interest rates often take longer to obtain. However, it is presently difficult to foresee the future of the credit market. You should be skeptical of any definite claims of future credit availability in any context.
Over all, bankruptcy is a detailed process that has many pitfalls for the unwary. Anyone considering bankruptcy should consult with an experienced bankruptcy lawyer before making the decision of whether to file for bankruptcy protection. Hopefully, the information contained in this article will help de-mystify this process.
How can our bankruptcy law firm can help you?
With over 30 years experience, Marshall Reissman has the depth and breadth of knowledge and a proven track record to successfully handle your bankruptcy legal needs.
We serve our clients with the same care and respect as if they were family; compassion, empathy and the utmost concern for our clients guide all of our efforts. We are A+ rated with the Better Business Bureau. We strive to eliminate the financial fear of hiring a law firm and will match or beat any quoted fee for comparable services with similar experience. We are results oriented, NOT “billable hour” driven.
Contact us today for a free consultation or come see us at our St. Petersburg office!