Bankruptcy FAQs

Depends. Under certain circumstances, judicial liens and nonpossessory, nonpurchase-money security interests may be removed if the fixing of the lien impairs an exemption that you’re entitled to on the date you file your bankruptcy case. This also depends on the value of the asset and the amount of senior liens and encumbrances on your property.

No. Terminating an employment because of bankruptcy is illegal. While an employer can fire an employee for no reason, using bankurptcy as a basis to do so is explicitly prohibited by Section 525 of the Bankruptcy Code, titled “Protection Against Discriminatory Treatment.”

No, unless they are sold for “reasonably equivalent value.” Otherwise the Trustee can recover the property because the transfer is Fraudulent. The look back period for fraudulent transfers is 2 years.

You must list all your assets as well as all your debts in ANY chapter of bankruptcy.You may voluntarily repay a creditor if you wish by entering into a reaffirmation agreement, or by a ride through if your payment is current when you file for bankruptcy. If you wish to keep certain non-exempt assets, you can redeem them from the Trustee or they might be abandoned to you if there is no equity in the assets.

Unfortunately, unless the court finds that paying off the student loan will impose an undue hardship on you or your dependents, student loans are not dischargeable in any chapter of bankruptcy.The bankruptcy code does not define “undue hardship,” leaving the courts to decide what constitutes an undue hardship.

The burden to demonstrate undue hardship will be on you. Courts vary in opinion, but they often apply a stringent three-part test to determine whether an undue hardship is present:

1. Income: If after you will not be able to maintain a minimum standard of living for yourself and/or your dependents after paying off the student loans. Minimum standard of living is objective, it’s mostly confined to food, clothing, and other basic necessities. It is subjective according to what you are used to prior to filing for bankruptcy. It is very hard to meet this element of the three part test.
2. Duration: If the financial situation that satisfies the income element will continue for a significant long period of time – often decades.
3. Good faith: You must have made a good faith effort to repay the loan prior to filing bankruptcy.

Your case will be filed in the District where you have your principle residence (or for businesses, the principal place of business) for the 180 day period before your bankruptcy petition date.

No, it is almost never too late to file bankruptcy. Assuming that the debt is dischargeable (among other things, a dischargeable debt is a debt that wasn’t incurred through fraud, or a domestic support obligation, etc.), you can still discharge the debt even if a creditor has already gotten a judgment against you.You can even discharge the debt if they have put a lien on your property (although the lien will remain on the property unless you are able to remove it during the bankruptcy proceeding).

While the term “bankrupt” is commonly used when referring to getting rid of debts, it is not technically correct. e.g. “I want to bankrupt my credit cards debts.”The correct legal terminology is “discharge” – you discharge your obligation to pay debts.In the event of a successful bankruptcy, your legal obligation to repay debts will be discharged.

Generally, the automatic stay takes effect immediately upon filing your case and it lasts until you receive your discharge. Stays against actions against property you own may last longer or shorter depending on what happens to that property during your case (i.e. whether the Trustee sells it).

Caution:
• If your case is dismissed for whatever reason, the stay terminates within 30 days after dismissal unless you can show cause to extend the stay.
• If your Chapter 7 case is dismissed for abuse, the stay does not go into effect at all when you subsequently file a Chapter 11 or Chapter 13 case unless and until the court allows it after a hearing.
• If you had a bankruptcy case dismissed under any chapter within one year prior to the filing of your present case, the automatic stay will terminate 30 days after your new case is filed, unless you obtain a court order extending it, for cause and a showing of good faith as to why the prior case was dismissed.
• If you had more than one bankruptcy case dismissed under any chapter within one year prior to the filing of your present case, the automatic stay will not go into effect at all unless and until the court allows it after a hearing.

It is an injunction that arises by operation of law immediately upon the commencement of bankruptcy case. The stay goes into effect even against creditors who do not receive notice about the bankruptcy later. It strictly prohibits the commencement or continuation of any acts to collect on a debt that arose prior to filing the bankruptcy, including but not limited to enforcement of judgments, creating or perfecting liens, and many other actions. It does not apply to collecting alimony maintenance and support, student loans, and certain tax obligations.

Utility services—Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.Discrimination—An employer or government agency cannot discriminate against you because you have filed for bankruptcy. Government agencies and private entities involved in student loan programs also cannot discriminate against you based on a bankruptcy filing.

Driver’s license—If you lost your license solely because you couldn’t pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back.

Co-signers—If someone has cosigned a loan with you and you file for bankruptcy, the cosigner may have to pay your debt. If you file under Chapter 13, you may be able to protect cosigners, depending upon the terms of your Chapter 13 plan.

There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse.

The fact that you’ve filed a bankruptcy can appear on your credit record for ten years from the date your case was filed. But because bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.

Legally speaking, all negative information regarding your credit has to disappear from the credit report after 10 years. A Chapter 7 and a Chapter 13 bankruptcy will stay for 10 years from the time the case is filed. One major consumer credit reporting agency is said to remove a Chapter 13 bankruptcy history after only 7 years, but it is not legally required to do so. All other negative credit information, such as late payment, civil suits, civil judgment, arrest records, foreclosure, loan modification, credit reduction, debt adjustment, etc., have to be removed from your credit report after 7 years. These time limits, however, do not apply to credit transactions that involve a principal amount of $150,000 or more.

If you decide to file bankruptcy, remember that debts discharged in your bankruptcy should be listed on your credit report as having a zero balance, meaning you do not own anything on the debt. Debts incorrectly reported as having a balance owed will negatively affect your credit score and make it more difficult or costly to get credit. You should check your credit report after your bankruptcy discharge and file a dispute with credit reporting agencies if this information is not correct.

After your case is filed, you must complete an approved course in personal finances. This course will take approximately two hours to complete. Many of the course providers give you a choice to take the course in-person at a designated location, over the Internet (usually by watching a video), or over the telephone. Your attorney can give you a list of organizations that provide approved courses, or you can check the website for the The United States Department of Justice website.

If you cannot afford the fee, you should ask the agency to provide the course free of charge or at a reduced fee. In a Chapter 7 case, you should sign up for the course soon after your case is filed. If you file a Chapter 13 case, you should ask your attorney when you should take the course.

In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” – or the 341 meeting, to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear at a hearing. In a Chapter 13 case, you may also have to appear at a hearing when the judge decides whether your plan should be approved. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

It now costs $335 to file for bankruptcy under Chapter 7 and $310 to file for bankruptcy under Chapter 13, whether for one person or a married couple. The court may allow you to pay this filing fee in installments if you cannot pay it all at once.

You must receive budget and credit counseling from an approved credit-counseling agency within 180 days before your bankruptcy case is filed. The agency will review possible options available to you in credit counseling and assist you in reviewing your budget. Different agencies provide the counseling in-person, by telephone, or over the Internet.  If you decide to file bankruptcy, you must have a certificate from the agency showing that you received the counseling before your bankruptcy case was filed.

Most approved agencies charge between $5–$50 for the pre-filing counseling.  However, the law requires approved agencies to provide bankruptcy counseling and the necessary certificates without considering an individual’s ability to pay. If you cannot afford the fee, you should ask the agency to provide the counseling free of charge or at a reduced fee.

If you decide to go ahead with bankruptcy, you should be very careful in choosing an agency for the required counseling.  It is extremely difficult to sort out the good counseling agencies from the bad ones. Many agencies are legitimate, but many are simply rip-offs. And being an “approved” agency for bankruptcy counseling is no guarantee that the agency is good. It is also important to understand that even good agencies won’t be able to help you much if you’re already too deep in financial trouble.

Some of the approved agencies offer debt management plans (also called DMPs). A DMP is a plan to repay some or all of your debts in which you send the counseling agency a monthly payment that it then distributes to your creditors.  Debt management plans can be helpful for some consumers.  For others, they are a terrible idea. The problem is that many counseling agencies will pressure you into a debt management plan as a way of avoiding bankruptcy whether it makes sense for you or not. You should not consider a debt management plan if making the monthly plan payment will mean you will not have money to pay your rent, mortgage, utilities, food, prescriptions, and other necessities. It is important to keep in mind these important points:

• Bankruptcy is not necessarily to be avoided at all costs.  In many cases, bankruptcy may actually be the best choice for you.
• If you sign up for a debt management plan that you can’t afford, you may end up in bankruptcy anyway (and a copy of the plan must also be filed in your bankruptcy case).
• There are approved agencies for bankruptcy counseling that do not offer debt management plans.

It is usually a good idea for you to meet with an attorney before you receive the required credit counseling. Unlike a credit counselor, who cannot give legal advice, an attorney can provide counseling on whether bankruptcy is the best option. If bankruptcy is not the right answer for you, a good attorney will offer a range of other suggestions. The attorney can also provide you with a list of approved credit counseling agencies, or you can check U.S. Trustee Program website.

In a Chapter 7 case, you can keep all property which the law says is “exempt” from the claims of creditors. Fundamentally, exemption or exempt property are the designations given to the property that the trustee is not permitted to liquidate and the debtor is permitted to retain in a bankruptcy case. They are usually items of property deemed essential to daily life, they help the debtor to obtain a fresh start by allowing the debtor to come out of the process with the essentials upon which to build a new life.It is important to check the exemptions that are available in the state where you live. If you moved to your current state from a different state within two years before your bankruptcy filing, you may be required to use the exemptions from the state where you lived just before the two-year period. In some states, you are given a choice when you file bankruptcy between using either the state exemptions or using the federal bankruptcy exemptions. If your state has “opted” out of the federal bankruptcy exemptions, you will be required to choose exemptions mostly under your state law. However, even in an “opt-out” state, you may use a special federal bankruptcy exemption that protects retirement funds in pension plans and individual retirement accounts (IRAs).

If you are allowed to use the Florida bankruptcy exemptions, they include but not limited to:

Wages: Fla. Stat. § 222.11.
• Compensation paid or payable in money of sum certain for personal services or labor whether called wages, salary, commission or bonus, of a head of family, defined as one who provides more than 50% of the support of a child or dependant.
• Amount: Head of family: $500 per week of disposable earnings exempt, unless debtor has agreed otherwise in writing. Amount garnished may not exceed that allowed by federal law. Disposable earnings are those left over after all deductions required by law.
• Survival after payment/deposit: Earnings remain exempt for 6 months in a bank account, even if commingled with other funds, so long as earnings can be traced and properly identified.
• Waiver: Wages of head of household in excess of $500 may be garnished with debtor’s written permission

Homestead: Fla. Const. art. X, § 4(a)(1); Fla. Stat. §§ 222.01 to 222.03, 222.05.
• Amount: Up to one-half acre inside a municipality or 160 acres outside a municipality is exempt under the Florida Constitution regardless of value, with exceptions for four types of debts (taxes, purchase money debts, services or labor for home repair or improvement, and other labor performed on real property). By statute, a manufactured home or modular home may be a homestead, whether or not the home owner owns the land. In addition, if the homestead is outside a municipality and includes less than 160 acres, the debtor may exempt non-homestead land to bring the total up to 160 acres.

Tangible personal property: Fla. Const. art. X, § 4(a)(2); Fla. Stat. §§ 222.061, 222.07, 222.25.
• Household goods: $1000 in any personal property.
o For a debtor who does not claim or receive the benefits of a homestead exemption, $4000 in any personal property (this exemption does not apply to a debt for child or spousal support).
• Motor vehicles: Up to $1000 in any one motor vehicle.
• Tools of trade: No exemption.
• Clothing and jewelry: See above.

Benefits, retirement plans, insurance, judgments, and other intangibles: Fla. Stat. §§ 222.13, 222.14, 222.18, 222.21, 222.22, 222.25; see Fla. Stat. §§ 121.131, 122.15, 175.241, 185.25, 222.21(2).

• Public benefits: Earned income tax credit, pursuant to the Internal Revenue Code, or a deposit in a financial institution traceable to an earned income tax credit.
• Pensions, retirement plans, and annuities: Public pension money received within 3 months before the attachment; certain tax qualified retirement plan (except as to claims of alternate payee under qualified domestic relations order).
• Other Pensions: All state officer and state employee pensions, county officers and county employee pensions, firefighter pensions, police officer pensions, IRAs, Roth IRAs, and ERISA qualified benefits, teacher pensions, etc. are fully exempt.
• Insurance, judgments, or other compensation for injury: Life insurance proceeds exempt as to creditors of the insured. Cash surrender values of insurance policies or annuities. Disability income benefits under any policy of life, health, accident or other insurance.
• Bank accounts: Money paid into or out of a medical savings account or hurricane savings account. Monies paid into or out of prepaid postsecondary education expense trust fund are not subject to attachment, garnishment or legal process by creditors of either purchaser or beneficiary of contract.
• Alimony, child support: Pension funds received by alternate payee under qualified domestic relations order.
• Survival after payment or deposit: Not specified in exemption statute, except as to tax refunds attributable to earned income tax credit, public pension money received within 3 months, or payments into or out of medical savings or prepaid college trust fund accounts.

In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth when your bankruptcy case is filed. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.

You also only need to look at your equity in property. That means you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you have only $10,000 in equity. You can fully protect the $50,000 home with a $10,000 exemption.

While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.

In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in Chapter 13. However, some of your creditors may have a “security interest” in your home, automobile, or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.

In a Chapter 13 case, you may be able to keep certain secured property by paying the creditor the value of the property rather than the full amount owed on the debt. Or you can use Chapter 13 to catch up on back payments and get current on the loan.

There are also several ways that you can keep collateral or mortgaged property after you file a Chapter 7 bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.

Definitely YES! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.

Yes, with some exceptions. Bankruptcy will not normally wipe out:

• Money owed for child support or alimony;
• Most fines and penalties owed to government agencies;
• Most taxes and debts incurred to pay taxes which cannot be discharged;
• Student loans, unless you can prove to the court that repaying them will be an “undue hardship.” See below;
• Debts not listed on your bankruptcy petition;
• Loans you got by fraud – knowingly providing false information to a creditor, who reasonably relied on it in approving your loan;
• Debts resulting from “willful and malicious” harm;
• Debts incurred by driving while intoxicated;
• Mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).