Frequently Asked Bankruptcy Questions
What is bankruptcy?
Bankruptcy is a federally sanctioned procedure in which consumers have the ability to discharge a great deal of their unsecured debt and otherwise reorganize their financial lives if they become over-extended. By filing for bankruptcy, a debtor is automatically granted certain protections under federal law which either terminates or stays all collection actions and creditor harassment and abuse. At the end of the bankruptcy process (generally 4-6 months) the debtor is granted a discharge of any unsecured debts (i.e. credit cards balances, medical/legal bills, promissory notes).
What happens when I file for bankruptcy?
When a bankruptcy petition is filed, the federal court will send out a notice to all of the creditors that you owe money to. This notice will require them to abandon all collection actions against you for at least one hundred and twenty days (this is known as the automatic stay). During this period, the Court will appoint an administrator (known as the Trustee) to review your debts, take possession of your non-exempt property and use it to pay off a portion of your legitimate debts. Thereafter, the Trustee will provide you with your exempt property and recommend that the Court grant you a discharge for all dischargeable debts.
How long does the bankruptcy process take?
Although each case is different, generally you can expect a consumer bankruptcy to last between four and six months.
Will I have to go to court?
Most clients are not required to appear before a Judge or attend any hearings in court during the bankruptcy process. Clients are required to attend something called a 341 MEETING (also known as a creditors meeting) approximately six weeks after the date of filing. At this meeting, the Trustee will generally ask some basic questions and your creditors have a right to appear and be heard (most do not attend). This meeting is generally short and lasts between five and fifteen minutes. Sometimes complications arise and a client is required to appear before a judge but this is a very rare occurrence.
What debt will a bankruptcy discharge erase?
At the conclusion of a bankruptcy case a client will receive a discharge erasing most of all of his or her debts. This discharge eliminates debts related to credit cards, medical bills, legal bills, money owed to contractors, money owed on car loans and most other arrangements where a client agreed to pay money in exchange for goods or services. In most cases, all of a clients debts are erased through bankruptcy.
What debt will bankruptcy not erase?
Some debts are not erased by bankruptcy and will survive even after the Court signs a discharge. These debts include: (a.) money owed for child support and alimony; (b.) money owed for criminal fines; (c.) money owed for some taxes depending on when they were incurred; (d.) most student loans; (e.) money owed to a car accident victim where the client was under the influence of drugs or alcohol.
What property can I keep?
Each state has a list of exemptions which allow a client to retain certain assets and still obtain a discharge of their debts. In Florida, this exemption generally covers: (a.) a client’s homestead; (b.) property held jointly with a non-filing spouse; (c.) annuity contracts; (d.) life insurance proceeds and cash surrender value; (e.) disability benefits; (f.) alimony and child support received; (g.) most pensions; (h.) personal property up to $ 1,000.00 in value; (i.) vehicles up to $ 1,000.00 in value; (j.) social security, unemployment and public assistance benefits; (k.) a portion of your wages. Additional exemptions may exist in your particular situation. In addition to exempt property, if the Trustee determines that an asset is not worth enough to justify the costs of sale/storage; he may abandon the asset in which case you are allowed to keep it.
Will bankruptcy affect my house and car loans?
Some loans, such as house and car loans, are called secured obligations because they include a lien against the property itself. For example, if a car payment is not made then the dealership may have the right to demand that the vehicle be returned. Bankruptcy will not affect these liens but it will erase the underlying debt. For example, if you stop paying your car payment after a discharge is entered; the dealership cannot sue you for the money (because the obligation has been discharged) but it can still repossess your car (because the lien remains).
Will my utilities be shut off if I file for bankruptcy?
No. Utility companies cannot refuse to provide you with service based upon the fact that you have filed for bankruptcy (even if they have a past due balance which is discharged). The utility company may require you to pay a reasonable deposit for future services and, of course, you will need to pay your monthly electric bills that accrue after the date that you file.
Can I be fired for filing bankruptcy?
No. Federal law prohibits a public or private employer from discriminating against you for filing bankruptcy.
Can a married debtor file without the other spouse?
Yes. There is no obligation for both spouses to file for bankruptcy in order to discharge debts belonging to one of them. In fact, if the majority of your debts are not jointly held with your spouse it may make sense to file alone. This will preserve your spouse’s credit and allow him or her to keep all of their property while eliminating your debts. However, if you have jointly held debt with your spouse then he or she will still be responsible for that debt even if you receive a discharge.