What is Bankruptcy?
Bankruptcy is a legal proceeding that allows an individual who owes more money than he or she can currently repay (“Debtor”) to get a fresh start financially. During this process, the person can either:
- Repay a portion of the money owed over a specified time period under Chapter 11, 12 or 13 of the federal bankruptcy code; or
- Have the entire amount of money that is owed forgiven or discharged under Chapter 7. In Chapter 7, you may have to surrender certain assets to the trustee in bankruptcy.
In both scenarios, filing for federal bankruptcy protection immediately stops all of your creditors from seeking to collect the money that is legally owed to them until the legal process has been completed, or they get special permission from the court to continue. This is called the “automatic stay”.
Will Bankruptcy Affect My Credit?
Most of the time if an individual is considering filing for federal bankruptcy protection, their credit is already damaged or has past due accounts. A bankruptcy filing will appear on your credit report for ten years. However, Chapter 7 will wipe out most of your unsecured debts and may pave the way for you to obtain new credit and build a good credit history by paying off balances and being a responsible debtor.
A Credit Card is Required for So Many Things Now…Can I Get one after bankruptcy?
You will typically have options available to you after filing for bankruptcy. You may not qualify for a typical “credit card” but might be able to use a bank or debit card for activities that you normally performed with a standard credit card. Further, your current credit card holder may grant approval to keep the card depending on your financial circumstances. If none of these options work, you may be eligible for a secured credit card that can be backed by your bank account.
Can I file for bankruptcy more than once?
If you have received a successful discharge of your debts in a Chapter 7 case, you cannot file again if your discharge has been in the last eight years. In a Chapter 13 case, the time period is 6 years. You cannot receive a Chapter 13 discharge if you have previously had a Chapter 7 in the last four years or a Chapter 13 in the last two years. Remember that if you did NOT receive a discharge in the previous filings, depending on the reasons, you can file again and receive a discharge without waiting.
What is the best type of Bankruptcy for me?
Every individual circumstance is different and you should consult with an experienced bankruptcy attorney to determine what is best for you and your family. However, there are certain guidelines for the different types of bankruptcy filings:
- Chapter 7 is known as “straight” bankruptcy or “liquidation.” It requires a debtor to give up property that exceeds certain limits called “exemptions”, so the property can be sold to pay creditors.
- Chapter 13 is called “debt adjustment.” It requires a debtor to file a plan to pay debts (or parts of debts) from current income.
- Most people filing for bankruptcy will want to file under either Chapter 7 or Chapter 13. Either type of case may be filed individually or by a married couple filing jointly
Will I Have to Go to Court During My Case?
While every case is different, you typically will be required to attend a meeting of creditors. This is where you will meet with the bankruptcy trustee (in charge of your case) and any creditor that wants to attend. This meeting is usually very short and you will be asked routine questions about what you have filed with the court and your individual financial situation. An experienced bankruptcy attorney will be able to prepare you for the proceeding.
If you are disputing a debt or if there is a legal challenge by a creditor, you may have to appear before a judge at a hearing. You would receive notice from the court and an experienced bankruptcy attorney will be able to argue your case to the judge.
Can I Own Property After Bankruptcy?
You are immediately eligible to own property after a bankruptcy. You will be able to keep any exempt property and anything you obtain after the bankruptcy is filed. Be careful if you receive an inheritance, a property settlement, life insurance money within 180 days after your bankruptcy. This money may have to be paid to your creditors if not already exempt. An experienced Florida bankruptcy attorney will be able to advise you on this rule.
Can My Employer Fire Me if I File for Bankruptcy?
There is a specific section of the federal bankruptcy code, 11 U.S.C, Sec. 525 that prohibits a governmental unit or private employer from discriminating against you because you filed for bankruptcy or because you failed to pay a dischargeable debt. You will need to seek the advice of an experienced bankruptcy attorney that can advise you if you are discriminated against in any way for taking advantage of federal bankruptcy protection.
Will I Lose My Home and Car If I File for Bankruptcy?
You will need to seek the counsel of an experienced Florida bankruptcy attorney as there are exemptions that may allow you to keep your home and your car. The equity you have in these assets may be fully exempt, meaning they do not have to be surrendered to the bankruptcy trustee. There are cases where a creditor may have a security interest in your home, car, or certain personal property. These secured interests may not be dischargeable and if they are not paid they may have to be given up in order to discharge your debts. Again, these are individual cases and you will need to seek out a bankruptcy attorney to fight for your rights.
Can I sell my assets to someone else to keep those items out of bankruptcy?
If you transfer assets with the intent of keeping them out of bankruptcy you may lose your entire discharge and you could be subject to criminal prosecution. You need to seek the advice of an experienced bankruptcy attorney before you make any attempts to sell or transfer property of any kind. The bankruptcy court may also set aside the transfers and it can have consequences for your entire case.
Do I have to take credit counseling and financial education?
All debtors that file for personal bankruptcy must have credit counseling. There are approved agencies that your attorney can provide and will make sure that it satisfies the court’s requirements. You must also take a financial education course but this cannot be taken until after you file your petition with the court. These courses can help you stay on track after your debts are discharged or if you have a debt repayment plan with the court.