THE PURPOSE OF THIS DOCUMENT IS TO GIVE YOU SOME GENERAL INFORMATION ABOUT BANKRUPTCY. IT IS NOT INTENDED TO CREATE AN ATTORNEY CLIENT
RELATIONSHIP OR TO PROVIDE LEGAL ADVICE TO ANY PARTICULAR INDIVIDUAL.
Reading of this document is no substitute for you asking and
receiving direct answers to your direct questions about your personal situation. All bankruptcy cases, while similar, have individual
differences. Please call my office to make an appointment to discuss your individual case. THERE IS NO FEE FOR A BANKRUPTCY CONSULTATION.
There
are several different types of bankruptcies. Two types of bankruptcies which usually do not apply to most of my potential clients
are:
1). The chapter 11, which is usually used for persons engaged in business,
2). The chapter 12, which is a special type of a bankruptcy
for a farmer. If you feel that you might be interested in either of these types of bankruptcy, please contact my office for further
information.
The two types of bankruptcies which I would like to discuss in further detail are the chapter 13 and the chapter 7. A
chapter 13 is known as an adjustment of debts of an individual with a regular income. It is used in several special circumstances,
which include, for example, the following: 1) You do not wish to just discharge your debt and feel that you have the ability to repay
your debt and wish to do so over time; 2) You have equity in your home and wish to keep the home, but are unable to exempt all your
equity in your home in a regular chapter 7 case, so you may wish to file a chapter 13 case so that you may keep your home; 3) You
are in arrears on your mortgage or your car note and are being threatened with foreclosure or repossession and wish to have time to
make up the arrears on your mortgage or car payment over time; 4) You have certain types of debts which would not be dischargeable
in a regular chapter 7 case, for instance, a tax obligation or an obligation for a student loan. Therefore, you may wish to file a
chapter 13 so that you may make payments to discharge those obligations. If you believe that you may be interested in filing a chapter
13 bankruptcy, please ask me for more information about it.
2005 Bankruptcy Act Credit Counseling
The 2005 Bankruptcy Act requires
all individual debtors who file bankruptcy on or after October 17, 2005, to undergo credit counseling within six months before filing
for bankruptcy relief and to complete a financial management instructional course after filing bankruptcy.
2005 Bankruptcy Act Means
Test
Under the 2005 Bankruptcy Act you income and expenses will be analyzed to determine if you qualify to file a Chapter 7 or if you
must file Chapter 13. To apply the means test, the courts will look at the your average income for the 6 months prior to filing and
compare it to the median income for that state. If the income is below the median, then you may choose Chapter 7. If your income exceeds
the median, the remaining parts of the means test will be applied to determine if you can file Chapter 7 or if you must file Chapter
13.
MOST PEOPLE FILE A CHAPTER 7 BANKRUPTCY, SO THE REST OF THIS NOTE WILL FOCUS MAINLY ON CHAPTER 7 BANKRUPTCIES. A chapter
7 bankruptcy is what's known as a "straight discharge" in bankruptcy. For the most part, all your debts are discharged (which means
that you will have no further legal obligation to pay them) and most people get to keep everything that they own. Technically NOT
included within the category of nondischargeable debts are debts for loans which are SECURED by an interest in some property. The
most common examples include a house note or a car note. Your obligation with regard to these types of debts is as follows: either
you must pay the debt or surrender the item to the creditor. So, with regard to a house note, if you have no equity in the house,
your obligation will be to either to continue to pay the debt according to the original terms of the note, or to give the house back
to the mortgage company. If you do decide to surrender a house or a car to the creditor, you will owe nothing further with regard
to that item, even if the creditor cannot sell the item for enough money to pay off the loan. If you are otherwise in good standing
with your mortgage company, the mortgage company cannot call the loan because you have filed a bankruptcy. If there is significant
equity in your house, you may end up having to file a chapter 13 bankruptcy instead of a chapter 7 bankruptcy. Equity is generally
determined by taking the current market value of the house, deducting all liens (which includes first and second trusts, equity lines,
and any judgments and tax liens which have attached to the house) and subtracting an additional 10% for selling costs. Increasingly,
credit card companies are also claiming security interests in items purchased on credit cards. Many companies, such as Sears, have
changed their financing agreements and credit card charge slips and are attempting to retain a security interest in items purchased
on their credit cards. As of this point, this applies only to store credit cards, not to general MasterCard or Visa accounts. If you
believe that this situation may apply to you, please bring it to my attention during our appointment.
THERE ARE CERTAIN DEBTS WHICH
YOU CANNOT DISCHARGE IN BANKRUPTCY.
Please be advised that the following items are descriptions of general categories of non-dischargeable
debts and should not be taken absolutely literally in their interpretation. If you have a debt which you believe falls in one of these
categories, please discuss the debt in more detail with me. The debts which are not dischargeable in bankruptcy are as follows:
1).
Income taxes which first became due less than 3 years prior to the filing of the petition; unless the return was not filed on time
or fraudulently filed
2). Property taxes which first became due less than 1 year prior to the filing of the petition;
3). Student loans,
regardless of when they were incurred ;
4). Child or spousal support or alimony;
5). An obligation to a spouse or former spouse in
connection with a property settlement agreement or divorce decree;
6). An obligation for a willful and malicious injury (as, for example,
an assault & battery);
7). An obligation arising out of a DWI automobile accident;
8). A debt in which the creditor alleges there
are false pretenses, false representations, or actual fraud;
9). A debt based on a false financial statement (as for example, if you
lied on an application for a loan or credit card and misrepresented your debts or your assets or your income to the creditor);
10).
An obligation for a cash advances of $750.00 within 70 days of the day you filed for bankruptcy;
11). Debts not listed on your bankruptcy
petition;
12). Debts involving fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny (as for example,
if you steal money from someone after being placed in a position of trust);
13). Fines or penalties owed to a governmental unit;
14).
Condominium dues which became due AFTER the bankruptcy is filed, IF the debtor remains in the property.
Again, please be advised that
these are only general categories of non-dischargeable debts and you should ask my advice regarding any debt which you are unsure
about.
IF YOU DECIDE TO FILE FOR BANKRUPTCY, WHAT ARE YOU ENTITLED TO KEEP?
If you own a house, if you wish to keep the property, you
may, so long as you continue to pay for it and are up to date on the payments. In addition, there are several exemptions which are
available to every householder. In the event that a husband and wife both file a bankruptcy, BOTH are entitled to claim the following
exemptions, so that the total amount that a husband and wife could exempt would normally be double the amount listed. The following
is a general list of the exemptions which are available in bankruptcy to persons living in Florida, but is not intended to be all
inclusive.
1). Annuity contract proceeds;
2). Alimony, child support needed for support;
3). Certain pension and profit sharing plans;
4). Certain life insurance proceeds;
5). Any personal property to $1,000 (Husband & wife may double);
6). Motor vehicle to $1,000
SO--WHAT
IS THE PROCEDURE IF YOU DECIDE TO FILE A BANKRUPTCY?
First, you need to come into my office for a consultation. The consultation is
free. The consultation generally takes around one hour. Should you decide you wish to file, I give you a questionnaire, which gives
me all the information which I need to prepare the Petition and Schedules on your behalf. You may question the necessity for some
of the information, but I can assure you that all of the information requested is in response to a question which you will see on
the bankruptcy petition. You must fill out the questionnaire completely. Otherwise, either I or my paralegal will have to contact
you to ask you for more information in order to complete your case, which will end up delaying your case unnecessarily. If you do
not understand any particular question, please call my office and either my paralegal or I will try to explain the question to you
over the telephone. In particular, please pay close attention to the listing of your creditors. I have no idea of the names and addresses
of your creditors or your account numbers. Therefore, in order for your schedules to be complete and for you to receive the benefit
of a full discharge in bankruptcy, you must give me the list of all of your creditors. Your creditors, for the most part, keep your
records by your account number, not your name. Therefore, if you do not provide me with the account numbers for each and every one
of your creditors, one or more of them may not connect up the creditor's notice from the Bankruptcy Court to your file. This could
cause them to attempt to collect the debt years after you have received your discharge. It will be much easier for you to provide
me with the account number now than to deal with that problem years from now.
One question which I am often asked has to do with whether
you need to list ALL your creditors or not. The answer is most emphatically, YES. When you file a bankruptcy petition, you certify
under penalty of perjury that you are listing all of your debts. This includes house notes, car notes, etc. I understand that most
people wish to keep their house and car. In almost all instances, that should be no problem. However, you must list that you owe them
money on the petition. Under some circumstances, you may wish to voluntarily re-pay a creditor. This might happen if someone, such
as a relative, has co-signed on the debt with you. You can voluntarily re-pay any debt which is listed on your petition. However,
you MUST list that you owe the creditor money on your petition.
If you have a credit card on which you owe no money, you need not list
that creditor, as you do not currently owe them money. However, please be advised that, even though you don't list that company as
a creditor, the creditor still has a right to cancel that credit card for your having filed a bankruptcy. This is because a credit
card is an extension of credit by the creditor, which can be withdrawn at any time. Often, people have a credit card on which they
owe only a small amount of money and they wish to repay that creditor, in hopes of keeping that card. I do not advise any client to
repay a debt for a credit card voluntarily, as it seems counterproductive to pay several hundred dollars just to have a credit card,
when there are secured credit cards available everywhere. Also, unless you have an agreement to that effect, even if you agree to
repay a creditor, they could still cancel your credit card because of your having filed a bankruptcy.
WHAT DOES IT COST, SHOULD I DECIDE
TO FILE A BANKRUPTCY?
I will be sending you a retainer letter regarding the filing of the bankruptcy. This document is my legal authorization
to represent you and I MUST have this signed retainer letter in order to file a bankruptcy on your behalf. The retainer letter also
explains to you my fee and your potential liability for any future fees.
The court cost for filing a Chapter 7 bankruptcy is $274.
This fee may not be waived but you may be able to pay it in installments. The fee of $189 for a Chapter 13 bankruptcy cannot be waived.
You
will not be charged any additional attorney's fees in this case unless there are motions filed in the case, which happens rarely.
In the event that additional creditors need to be added to your petition after it is filed, or if motions are filed by you or by a
creditor, you will be charged additional fees on a per hour basis. One example of a motion filed by a creditor is if someone were
to file an objection to your discharge, based on one of the grounds set out above--for example, if you filed a false financial statement
at the time that you obtained a loan or a credit card. Another, and much more common, example, is if you need to file a motion to
add a creditor to your bankruptcy AFTER the case is filed with the Bankruptcy Court. Should you leave out a creditor on your list
of creditors, that creditor's debt will not be discharged. Therefore, after the case is filed, it is very important that you again
check your list of creditors to make sure that all your creditors are in fact listed on the petition. If you discover that you have
omitted a creditor from the petition, you can amend your petition to add that creditor to your petition. However, I will charge you
a fee, plus costs, to amend your petition to add creditors to the petition after it is filed.
Once you have decided that you are going
to file a bankruptcy, do NOT charge anything on a credit card or take any additional cash advances or other extensions of credit.
Also, once you have decided that you are going to file, provided you have the funds and the information readily available so that
we can file soon after we get the information from you, do not pay anything to the creditors that you are going to discharge in bankruptcy.
Of course, if you have a house or car that you are going to keep, please continue to make those payments. If you are currently receiving
harassing phone calls from your creditors, ONCE YOU HAVE PAID ME AT LEAST HALF OF MY FEE, please tell the creditors that you are filing
a bankruptcy, give them my name and number, and tell them to call me. I ask you to not give out my name and number to your creditors
until you have paid me at least half of my fee.
After you return your questionnaire, your signed retainer letter, and the money for
the fee to my office, we will prepare your actual bankruptcy Petition. It will normally take us about a week to two weeks from the
time you drop off these documents before the petition is ready for your signature. In the event that any of the information on the
questionnaire is not filled out, we will need to contact you to obtain that information and this will delay the filing of your petition.
After
the case is filed with the Bankruptcy Court, you will need to attend one hearing. This hearing is called the Meeting of Creditors
or the 341 hearing. This hearing takes place approximately 30 days after the case is filed with the Court. Generally these hearings
can be held on any day of the week and we have little control over the dates when they are held. You will get about two weeks notice
of when your hearing will be. YOU HAVE TO ATTEND YOUR HEARING OR THE CASE WILL BE DISMISSED. I will attend the hearing with you, of
course.
All 341 hearings are not heard before a Judge, they are heard before a U.S. Trustee. Bankruptcy 341 hearings are NOT held at
the Bankruptcy Court. They are held at the U.S. Trustee's office, which is located in Tampa for the local area of Polk County. We
have directions to the hearing place, so you may wish to call for directions.
The Middle District of Florida includes the following
counties: Baker, Bradford, Brevard, Charlotte, Citrus, Clay, Collier, Columbia, De Soto, Duval, Flagler, Glades, Hamilton, Hardee,
Hendry, Hernando, Hillsborough, Lake, Lee, Manatee, Marion, Nassau, Osceola, Orange, Pasco, Pinellas, Polk, Putnam, Sarasota, Seminole,
St. John’s, Sumter, Suwannee, Union, Volusia. If you do not live in one of these areas, your case probably cannot be filed in
the Middle District, and you should let me know immediately, so that I can refer you to another attorney.
The hearings are held in
a hearing room, which is basically just a room in an office building, about twice the size of my office, with two tables up front
and about 30 chairs in the back. There will be a tape recorder there to record the proceedings, but no actual court reporter.
Who will
be there at the 341 hearing? The average docket consists of about 12-15 cases, about half of which will be joint cases between husband
and wife. As bankruptcy attorneys, we often file more than one case at the same time. Therefore, there will probably be about 6 attorneys
there, representing these 12 Debtors. There will also be the U.S. Trustee there, along with the Trustee's secretary. In addition to
these people, there will, in all likelihood, people there representing creditors. These companies have determined that they believe
it is worthwhile for them to hire attorneys to come to the 341 hearings every week and sit there all day in an attempt to get people
to voluntarily pay back their debts to their companies. I never advise any of my clients to do this. In addition to these representatives,
there may be one additional creditor there for that total of 12 cases. It is unlikely that any of your creditors will appear, with
the possible exception of private individuals. If you owe a private individual money, they may show up at the hearing, because they
don't understand what's going on, or they think that they have to appear.
Each person's bankruptcy hearing only takes about five minutes
and they run fairly well on time. Therefore, you can anticipate that, if your hearing is scheduled for 10 A.M., that you will likely
be done by 11 A.M., unless something relatively unusual happens. Sometimes hearings do run late, especially if there happens to be
a business bankruptcy on an earlier docket than yours. Creditors receive notice with regard to all bankruptcy cases filed, but they
are much more likely to show up for business bankruptcies and to ask questions. This means that all the hearings on that date could
run later than normal. Technically 341 hearings are open hearings, from the standpoint of, if anyone wanted to come in from off the
street to listen to them, they could. As a practical matter, this is unlikely to happen. Even if someone did come in from off the
street to listen to some cases, they would not stay very long, as the hearings are exceedingly boring to a casual observer.
In all
likelihood, the only person who will be asking you questions will be the U.S. Trustee. The U.S. Trustees are attorneys in private
practice, the same as I am. However, they are on a list to be appointed to hear bankruptcy cases approximately one day every month
or so. The Trustee asks basically the same questions of everyone. He will ask if you own a house, if you own a car, does anyone owe
you money. He will ask if you still live at the same place as when you filed the petition. He will ask if you still work at the same
place as when you filed the Petition. He will ask for your daytime telephone number. He will ask whether you have filed your tax returns
for last year yet. He will ask whether you have received a refund or whether you expect to receive a refund. He will ask you whether
you listed all your assets and all of your debts on the Petition. Once you have answered the Trustee's questions with regard to your
particular case, you are free to leave.
After the 341 hearing, there are only two things which you need to do. First, you need to let
me know if you move your residence address, so that I can inform the Court of your change of address. Second, if you receive any bills
or any telephone calls from creditors after the date of the hearing, you should either telephone the creditor yourself and make sure
that they have received the notification from the Bankruptcy Court or call my office so that we may do so. Also, please do not assume
that I have received a copy of correspondence you have received from a creditor. If you have any questions about any correspondence
that you receive from a creditor, please contact me to discuss the matter with me.
You will get your discharge in bankruptcy in the
mail approximately 3 months after your hearing, or approximately 4 months after the date the case is filed. The reason that the case
has to remain open for this period of time is so that creditors will have their allotted statutory period of time to object to your
discharge. This is based on the exceptions to discharge which we talked about at the beginning--false financial statements and the
like.
How does the filing of a bankruptcy effect you? You cannot be fired from your job for having filed a bankruptcy. In fact, in
most cases there is no reason for your employer to even know about your having filed a bankruptcy. The Court does not notify them
and I will not notify them. The only exception to this is if your wages are being garnished, we will need to notify your employer
to let them know to release the garnishment. A bankruptcy COULD, however, impact your job if you require a security clearance for
your work. I suggest that you contact your security department if this might be a problem for you.
The fact that you have filed a
bankruptcy will be on your credit history for ALL purposes for 10 years, and for some limited purposes even after that 10 years. That
does NOT mean that you will be ineligible for credit for that period of time. It DOES mean that a creditor that does a credit check
on you will be able to discover that you have filed a bankruptcy for that period of time. What the creditor does with that information
is up to them. It is legal for someone to discriminate against you in the extension of credit for having filed a bankruptcy. This
means that you may legally be declined for a car note or a house note, or you could be required to post an additional security deposit
for rent or could be required to have a cosigner in order to qualify for a loan.
A bankruptcy is a snap-shot of your economic condition
on a certain date. On that date, you must list everything you OWN and everything you OWE. With certain limited exceptions, anything
which happens after the date the case is filed is totally irrelevant. Provided that you had originally exempted the money which you
used to purchase the ticket, after your bankruptcy case is filed, you could purchase a Florida Lottery ticket and the ticket
could come in as a $50 Million winner, and the money would be totally yours to keep. You may purchase anything that you are able to
purchase after the date the case is filed, either with cash or credit and you may incur any new debt that you are able to incur after
the case is filed. Once you have gone through the first hearing, you should be able to dispose of any property that you wish to dispose
of. However, please check with me before disposing of any property.
What a bankruptcy will do for you is to attempt to give you a "fresh
start". With certain exceptions, you will no longer owe the debts which are listed on your petition. However, if you wish to voluntarily
pay any debt which has been discharged, you may do so. It is not as if you actually paid the debts which were discharged, as far as
your credit report is concerned, but the debt will no longer be legally enforceable against you. You will no longer have a legal obligation
to repay a debt, giving you an opportunity to start over with a clean slate. The future is then up to you.