Chapter 7 Bankruptcy Vs Chapter 13 Bankruptcy
There are two common types of bankruptcy you might consider as an individual consumer: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
With Chapter 7 bankruptcy, many of your assets are liquidated, and the proceeds are used to repay your creditors. After your creditors are paid and your eligible debts are discharged, youre no longer responsible for repaying your debts .
Rather than having eligible debts completely discharged, Chapter 13 bankruptcy is more like an extended repayment plan. You develop a plan to repay your debts over a period of three to five years, giving you an opportunity to retain more of your assets than if you filed for Chapter 7 bankruptcy.
Can all debts be eliminated in a Chapter 7 bankruptcy?
While credit card debt and many other forms of debt can be eligible for discharge when you file Chapter 7, some are not. Examples of ineligible debts include alimony or child support, some taxes, certain student loans and more. If you have nondischargeable debt, youll be responsible for repaying it even if you file for Chapter 7 bankruptcy.
How Trustees Can Increase The Size Of The Bankruptcy Estate
The whole point of bankruptcy is to make sure that everyone gets their rightful share of the “pie” when there’s not enough pie to go around. Or to put it an more legal way: to provide an orderly distribution of available assets to all creditors, based on the priority outlined in federal bankruptcy law.
The job of the trustee is to make that “pie” as large as legally possible.
Undoing Preferential Transfers That You Made Before Filing
One tool the trustee has is the authority to undo what are called “preferential transfers” — that is, money you transferred to someone else just before filing bankruptcy.
Under this power, the trustee will be very interested in undoing any recent repayments of debts you made to your relatives or friends just before bankruptcy, as these are called a “preference.” The trustee can reverse these transactions and reclaim it for the “bankruptcy estate” because, by repaying these people, you have “preferred” some people you owe money to over others — and bankruptcy does not allow this.
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Do I Qualify For Bankruptcy Bankruptcy Means Test Standards For Broward County
You may be surprised to learn that whether you can file for bankruptcy can come down to which state and county you live in.
Which type of bankruptcy you qualify for depends, in part, on whether your annual income is more or less than the Florida median income. Before looking at numbers and formulas, however, you should be familiar with the two main types of personal bankruptcy:
Will Bankruptcy Affect My Credit
Great question! One of the biggest misconceptions about bankruptcy is that it will ruin your credit forever. That is false. Our emphasis is in credit. Face it. Without a good credit score, it is hard to be approved for anything. Most people come to our office with bad credit to begin with. Bankruptcy may actually IMPROVE your credit because your debt to income ratio will improve since most debts will be wiped out. It is not uncommon to see a jump of 70 to 100 points in your credit score because you filed bankruptcy! 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. I am currently the only attorney in Orlando that provides a free service in reviewing your credit reports and MAKING SURE they are reporting accurately. Because its not just what happens during the bankruptcy, it is what happens after that is just as important.
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How Bankruptcy Works In Florida
In most respects, filing for bankruptcy in Florida isn’t any different than filing in another state. The bankruptcy process falls under federal law, not Florida state law, and it works by unwinding the contracts between you and your creditorsthat’s what gives you a fresh start.
But Florida’s laws come into play, too, in a significant way. They determine the property you can keep in your bankruptcy case. You’ll also need to know other filing information, which we explain after going over some basics.
We Will Represent You Through The Entire Process
After you have filed for bankruptcy in Jacksonville, FL, our office will ensure that your needs are taken care of throughout the entire process. No cover attorney will attend your meeting with the Trustee. Our office will prepare you for your meeting and attend the meeting with you. If there are issues with the Trustee, our office will handle that situation to ensure that you receive fair treatment from the Trustee to the extent allowed by the existing laws.
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Student Loans In Chapter 7 Bankruptcy
Student loans are not dischargeable in Chapter 7 bankruptcy unless the debtor can demonstrate that loan payments impose undue hardship. To eliminate a student loan under the undue hardship exception, the debtor must file a separate motion with the bankruptcy court and appear before the bankruptcy judge with evidence of hardship. As a practical matter, it is difficult for bankruptcy debtors to demonstrate undue hardship unless the debtor is physically unable to work.
Most bankruptcy courts use the Brunner test in determining hardship. Under this test, to discharge student loans in bankruptcy, the debtor must show:
Getting Professional Legal Advice
$0 to $2,500
As mentioned in the previous section, at some point in the bankruptcy process, you may decide to hire someone to help you. If you qualify for free legal aid and help is available near you, this could cost you nothing. Or, if you just want help with the mechanical task of completing the forms and dont need legal advice, you can hire a bankruptcy petition preparer .
But if you have questions about how to interpret a particular form, or want an opinion about how bankruptcy law, state exemption laws, or federal tax laws apply to your particular situation, you may want to hire a bankruptcy lawyer, at least for an initial consultation.
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Chapter 13 Bankruptcies And Other Situations
While in some cases you can file bankruptcy without a lawyer, there are exceptions, depending on the type of bankruptcy. Some examples include:
- If your corporation or partnership is facing bankruptcy, you’ll need a bankruptcy lawyer.
- If you fail the Means Test because your income is too great, you may have to file a Chapter 13 bankruptcy rather than a Chapter 7. In that case, you can still file for bankruptcy without a lawyer, but it will be more difficult. That’s because Chapter 13 cases are much more complicated than Chapter 7 bankruptcies.
In addition to filling out the needed paperwork, you’ll have to create a repayment plan detailing how you plan to repay your creditors. As with Chapter 7 cases, downloading a bankruptcy forms package will help you stay organized by providing you with all the paperwork you need to file.
Liquidation By The Trustee
The next step in the Chapter 7 process will be for the trustee to start liquidation. The trustee will attempt to locate your non-exempt assets, auction them, and distribute the proceeds from the sale to creditors. Exempt property is the property that you do not have to forfeit when filing for bankruptcy. The trustee will not be allowed to collect and auction exempt property. Before you file for bankruptcy, it is essential to know which exemptions you qualify for. The number of exemptions may significantly impact your decision on whether or not to file for bankruptcy.
Depending on the circumstances of your case, all of your property may be exempt from the bankruptcy. On the other hand, you may be forced to liquidate precious assets if you file for Chapter 7. Contact a bankruptcy attorney for help in determining what property of yours may qualify for an exemption before filing. You may not have the chance to amend your filings, so it is crucial to get it right the first time.
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How Do I Qualify For Chapter 13 In Florida
An individual qualifies for a Chapter 13 bankruptcy in Florida as long as the individual’s unsecured debts are below $419,175 and the individual’s secured debts are less than $1,257,850 according to the American Bankruptcy Institute. This is for cases filed on or after April 1, 2019. Chapter 13 eligibility is quite a bit different, so many individuals are eligible for a Chapter 13 bankruptcy in Florida who may not be eligible for a Chapter 7 bankruptcy.
Advantages Of Chapter 13
Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on consumer debts. This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.
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Where Do I File For Bankruptcy
Most people file for bankruptcy in the federal district court closest to where they live. However, if you run a business in a different district and most of your property is located there, you may have to file in that location.
Also, if you’ve moved in the past six months , you may have to file in the federal district court where you used to live. It all depends on where the greater portion of your property has been for most of the past 180 days.
Wherever you’re required to file, know that you can handle most of your business with the court, including filing your bankruptcy forms, by mail. However, you will need to visit the courthouse in person at least once, for a meeting with the bankruptcy trustee.
For more details, and to find your local court, see our articles on How to File for Bankruptcy.
What Happens At My First Appointment With A Bankruptcy Attorney
We offer a free consultation to review a consumers financial profile. In the consultation, well review the immediate problems that they have with debt, as well as the less immediate debt problems. We will evaluate income and expenses in order to see which option is most suitable for them. In some circumstances, the best option is not to file bankruptcy at all! If bankruptcy is appropriate, then we will review the chapters of bankruptcy that appear to best fit the situation, review payment options and take the case from there.
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Florida Bankruptcy Lawyer Cost
The cost of a Florida bankruptcy lawyer varies widely. Weâve heard of lawyers charging only a few hundred dollars for simple Chapter 7 bankruptcy in Florida. It can go up to the $3,000 range. If youâre curious to know the cost of a bankruptcy lawyer in Florida near you, we suggest calling a few different attorneys to get quotes, as most of them provide free consultations.
Mail Documents To Your Trustee
Most of the steps in your journey to a fresh start are done before your Chapter 7 bankruptcy is filed with the court. But, do you have some obligations after filing your case. The first such task is to send your bankruptcy trustee the paperwork that they request.
The bankruptcy trustee will be assigned to your case by the court after your bankruptcy petition has been filed. Theyâre also the person youâll be dealing with at your meeting of creditors. You can find the name and contact information of your bankruptcy trustee on Official Form 309A which youâll receive from the court within 1 – 2 weeks of filing your case.
If you donât hear from your bankruptcy trustee within 2 – 3 weeks from filing, itâs ok to contact their office to find out what paperwork they require.
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I Have Never Been Late On A Payment How Can Bankruptcy Be Appropriate For Me
We have many clients that are drowning in debt, but they appear to be “making it” despite having depleted their savings. They emphasize at our consultation that they âare current on all their debts.â Yet, they can see the writing on the wall. They are staying current by using up their savings and even cashing in retirement accounts. Often they have transferred the debt from one credit card to another in search of temporary low interest rates and pre-approved credit cards. Ask yourself what your total monthly credit card and loan payment is. Then ask yourself if you have enough income left over each month after paying normal living expenses to pay the minimum payment on all that debt. If you can’t, then you are traveling backwards, even though you haven’t defaulted on a loan yet.
What Bankruptcy Chapter Will You Choose
One of the critical questions you must answer before proceeding with your bankruptcy is the bankruptcy chapter you will file for. The two most common types of bankruptcy are Chapter 7 bankruptcy, also known as liquidation or straight bankruptcy, and Chapter 13 bankruptcy, often referred to aswage earner bankruptcy.
If you want to get rid of your debts quickly and dont mind losing some of your assets in the process, Chapter 7 bankruptcy may be the ideal option for you. However, if you want to keep all of your assets or cannot qualify for Chapter 7 bankruptcy, Chapter 13 bankruptcy may be a very useful alternative.
If you want to know which type of bankruptcy best fits your specific financial situation, you should talk to an experiencedbankruptcy lawyer.
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Is A Lawyer Required For Bankruptcy Or Debt Settlement
Debt settlement can usually be handled without an attorney because a court filing is not required. While you can enlist the help of an attorney, you can work directly with your creditors if you wish. There are also third-party debt settlement companies who can negotiate with creditors on your behalf. Keep in mind, you cannot force the creditor into a debt settlement, even if you hire a lawyer.
While it is not required to hire an attorney, it can significantly improve your chances of success. A 2014 study found that only 48.2% of all bankruptcy cases without an attorney received a discharge of debt. Conversely, 82.1% of borrowers who hired a lawyer received a discharge of debt.
There are many reasons why you should hire a bankruptcy lawyer to help you eliminate your debts. But not all bankruptcy attorneys are created equal. Careful consideration should be taken to ensure you retain the right lawyer for your case. Before you hire an attorney, ask the lawyer about their experience and qualifications. You should also do an internet search and research their reviews from previous clients.
Emergency Circumstances In Bankruptcy
It is rarely a good idea to file an emergency bankruptcy if you can avoid it. Bankruptcies are paper-intensive, and bankruptcy law requires you to fully, accurately, and honestly disclose all of your assets, debts, income, expense, and various financial information.
Filing a petition also triggers deadlines you’ll be required to meet. If you file a bankruptcy too hastily, you might make mistakes that could cause you difficulty later, including the dismissal of your case or a denial of your bankruptcy discharge. There are even criminal penalties if the court finds you were intentionally evasive or less-than-truthful in your statements and paperwork.
However, you might not be able to avoid filing an emergency bankruptcy petition. An emergency petition can help prevent the following:
- the sale of your home through foreclosure
- car repossessions
Here’s how it works.
When you file for bankruptcy, the court puts in place the “automatic stay.” The automatic stay is an order that prevents most creditors from moving forward with collection actions against you.
Keep in mind that the stay will be temporary when it comes to foreclosure, repossession, and evictions in Chapter 7. A Chapter 7 bankruptcy doesn’t have a mechanism to fix those problems. In Chapter 13, you can catch up on delinquent mortgage and car payments if you can afford it. You might be able to fix an eviction if you can bring your payments current in a reasonable period .
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Chapter 13 Bankruptcy Plan Payment In Florida
The Chapter 13 bankruptcy Florida plan payment estimate considers the IRS national expense figures and the state-specific expenses such as the Florida Administrative Expense Multiplier and the Florida Bankruptcy Allowable Living Expenses.
Most people are interested to understand whether they qualify for Chapter 7 and what his/her Chapter 13 plan payment would in Chapter 13. Estimating a more precise Chapter 13 bankruptcy plan payment on your own can be complicated because of the complex bankruptcy forms used. To aid, we build the following calculator to help estimate whether you qualify for a Chapter 7 AND to help estimate what your plan payment would be in a Chapter 13 bankruptcy