FREQUENTLY ASKED QUESTIONS
Will bankruptcy hurt my credit? Your bankruptcy may stay on your credit report for up to 7-10 years. However, in many cases, bankruptcy will improve your credit as soon as you receive your discharge because your past due creditors will be discharged and no longer report to the bureaus. You may immediately apply for a secured credit card and car loan and you may apply for a new mortgage after two years after bankruptcy. There are new FHA programs for home financing one year after filing bankruptcy.
Are all of my unsecured debts wiped out in bankruptcy? Chapter 7 bankruptcy can eliminate most unsecured debts such as collection judgments, medical bills, credit card bills, deficiency judgments on repossessions or foreclosures, auto accident insurance claims, personal loans, signature loans, unpaid rents or broken leases, certain taxes, gambling debts, old utility bills, etc. Not all debts will be discharged through bankruptcy. Non-dischargeable debts include alimony and child support, fines payable to any governmental unit, student loans, restitution imposed on you as part of a criminal sentence, debts incurred through fraud or by willful or malicious actions and certain taxes.
Can my employer fire me if I file for bankruptcy? No, the bankruptcy code prohibits an employer from firing you solely because you filed for bankruptcy.
What is included with the Bankruptcy Petition Package? The Chapter 7 bankruptcy petition package includes the Petition, Schedules A - J, the Statement of Financial Affairs, the Means Test with calculations complete, and a number of other miscellanious forms. Bankruptcy Relief Now prepares all of the documents (approximately 45 - 60 pages) after you complete the questionnaire package providing information regarding your assets, income, expenses, etc.
What is the Chapter 7 Means Test? The means test was designed to limit the use of Chapter 7 bankruptcy to those who truly can't pay their debts. The bankruptcy "means test" determines whether your income is low enough for you to file Chapter 7 bankruptcy. High income filers who fail the means test may use Chapter 13 bankruptcy to repay a portion of their debts, but may not use Chapter 7 bankruptcy to wipe out their debts altogether. It is a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. The Means test is determined by deducting specific monthly expenses from your average income over the six calendar months before you file for bankruptcy to arrive at your monthly "disposable income."
However, having to take the Chapter 7 means test doesn't mean that you must be penniless in order to use Chapter 7 bankruptcy. You can earn significant monthly income and still qualify for Chapter 7 bankruptcy if you have a lot of expenses, such as a high mortgage and or automobile payments.
Only bankruptcy filers with primarily consumer debts, not business debts, need to take the means test. To take the means test, you must first determine whether your income is more or less than the median income in your state. If you earn more than the median, you must figure out whether you would have enough left over, after subtracting certain expenses, to repay some of your debt. Bankruptcy Relief Now will prepare the documents and calculations of the means test for you.
When will the creditors stop calling me? Filing for Chapter 7 bankruptcy puts into effect an "Order for Relief" - known informally as the "automatic stay". The automatic stay immediately stops most creditors from trying to collect. So, at least temporarily, creditors cannot legally garnish your wages, your bank account, or go after your car, house, or other property.
Who is the Bankruptcy Trustee for Chapter 7 Bankruptcy? The court exercises its control through a court-appointed person called a "Bankruptcy Trustee." The Trustee's primary duty is to see that your creditors are paid as much as possible on what you owe them. The Trustee will examine your papers to make sure they are complete and to look for nonexempt property to sell for the benefit of creditors. The Trustee will also look at your financial transactions during the previous year to see if any can be undone to free up assets to distribute to your creditors. In most Chapter 7 bankruptcy cases, the Trustee finds nothing of value to sell.
What is the 341 Creditors Meeting? A week or two after you file, you (and all the creditors you list in your bankruptcy papers) will receive a notice that a "creditors meeting" has been scheduled. The bankruptcy Trustee runs the meeting and, after swearing you in, may ask you questions about your bankruptcy and the papers you filed. In the vast majority of Chapter 7 bankruptcies, this is the debtor's only visit to the courthouse and takes approximately 5 - 10 minutes.
What Happens to Your Property? If, after the creditors meeting, the Trustee determines that you have some nonexempt property, you may be required to either surrender that property or provide the Trustee with its equivalent value in cash. If the property isn't worth very much or would be cumbersome for the trustee to sell, the trustee may "abandon" the property - which means that you get to keep it. Most property owned by Chapter 7 debtors is either exempt or is essentially worthless for purposes of raising money for the creditors. As a result, few debtors end up having to surrender any property.
How Your Secured Debts Are Treated? If you've pledged property as collateral for a loan, the loan is called a secured debt. The most common examples of collateral are houses and automobiles. If you are behind on your payments, the creditor can ask to have the automatic stay lifted in order to repossess or foreclose on the property. However, if you are current on your payments, you can keep the property and keep making payments as before -- unless you have enough equity in the property to justify its sale by the trustee.
What is The Chapter 7 Bankruptcy Discharge? At the end of the bankruptcy process, all of your debts are wiped out (discharged) by the court, except child support, most tax debts, and student loans unless the court rules otherwise, or any debts incurred by fraud or malicious acts.
Is bankruptcy a judicial process? In most cases bankruptcy is more of an administrative process than a judicial process. Unlike other court cases, filing bankruptcy does not create a lawsuit and there is no plaintiff and no defendant. The role of the court is to supervise the process and to issue orders where necessary. The executive part of the government is represented in the bankruptcy process by the Department of Justice which appoints bankruptcy trustees to provide the administration. The trustees are given broad powers to administer bankruptcy cases and they serve the role of custodian.
Typically in chapter 7 cases, the debtor never sees the judge or appears in a court room and his only contact with the court is usually the one short meeting with the trustee.
Do I need to hire an attorney? No you are not required by law to hire an attorney. An attorney will not speak for you at the Meeting of Creditors or speak on your behalf. They may sit near you when you answer questions for yourself at this meeting that typically only lasts just a couple of minutes. However, if you believe you need legal advice, feel free to meet with an attorney for a consultation. Most attorney's will offer this service for free. Keep in mind that in most cases the court will not waive the filing fee if you hire an attorney.
Do I need to notify my creditors? No, the bankruptcy court will notify your creditors using the creditor matrix disc that we provide to you along with your documents. When will creditors stop calling? As soon as your case is filed with the court, your automatic stay is in effect and your creditors may no longer contact, sue, garnish or perform any other collection activity against you.
Will I lose my personal property? - Exemptions - Chapter 7 bankruptcy is in some ways a bargain. The bankruptcy court agrees to wipe out your unsecured debt and in exchange, your creditors are entitled to proceeds from the sale of some of your assets. However, in most chapter 7 bankruptcy cases, there is no sale of any property of any kind!
Thanks to exemptions, most or all of your property may be fully protected from sale including your home and cars. Exemptions vary from state to state.
What happens to my car in bankruptcy? In most bankruptcy cases, you can protect your car using allowable bankruptcy exemptions. It is important to clarify whether you have a clear title to your car or if you have secured your car as security for a debt. If you have pledged your car as security for a debt or if you are currently financing a vehicle, you will probably have a few choices for your secured loan such as reaffirming the debt, redeeming the debt, or surrendering the debt.
Reaffirm - A reaffirmation agreement constitutes a contract between you and your car creditor. You will agree to pay the balance owed on your car note, despite your bankruptcy filing. Under this plan, you will continue to make your payments and the creditor agrees not to repossess your car. If you do not make your payments, the car lender is able to repossess the car and sue you for the deficiency balance. Reaffirmation agreements are voluntary, but as you can see, it is a decision with serious repercussions.
Redeem - In chapter 7 bankruptcy, you are entitled to purchase or redeem your car from your creditor by making a one-time payment equal to the car’s fair market value. The U.S. Bankruptcy Code provides that you are required to pay your creditor the replacement retail cost of the car, and the balance of the debt will be discharged. For example, if a car is worth $5000 and the owner owes the finance company $10,000, you may be able to redeem the vehicle by paying the creditor $5,000. The remaining amount will be discharged by your bankruptcy.
offers redemption loans for folks who qualify for their program. They will loan you the fair market value for your automobile only if they can save you money in the long run. The loans are reported to all major creditor bureaus allowing you to reestablish your credit. There is no cost to see if you qualify for this program.
Surrender - If you cannot afford the monthly payments on your car loan or if you determine that you owe more than the car is worth, you may surrender the car and discharge the debt. If you are leasing a car, you may opt to either continue making monthly payments or surrender the car back. If you surrender the vehicle, any obligation under the lease will be eliminated by the bankruptcy.
Will I qualify for Chapter 7 bankruptcy? The 2005 bankruptcy law changes require bankruptcy filers to pass the Chapter 7 Means Test. A major component of the means test is to compare your income to the state's median income level. If your income is less than the state's median income level then you probably qualify for chapter 7. If your income is more than the state's median income level you may still qualify for the chapter 7 after taking other certain types of debts into consideration. If your income is still too high, then you may need to file under chapter 13.
As of April 1, 2018 the state median income level for Florida is:
$46,677 for a 1 person household
$57,968 for 2 persons
$62,910 for 3 persons
$74,512 for 4 persons
$82,912 for 5 persons
If I rent an apartment, can I be evicted if I file bankruptcy? Not immediately. In most cases the automatic stay will prevent your landlord from evicting you. You will be required to assume your lease if you want to stay in the apartment. This means that you must make up any missed payments and make a future payments on time. There are two exceptions to the rule that your landlord cannot evict you upon filing for bankruptcy. If the landlord has already sued you for eviction and the court has given your landlord the right to take possession of your apartment, your landlord will be able to evict you 30 days after you for bankruptcy. Also, if your landlord has already started the eviction proceedings because you endangered the property or used illegal drugs on the property, then he will be able to continue those eviction proceedings fifteen days after you file bankruptcy.