Frequently Asked Questions About Bankruptcy

ORLANDO BANKRUPTCY FAQ’S

Yes. Some people are concerned that filing for bankruptcy will leave them homeless. This is not true. In fact, bankruptcy may actually help you save your home from foreclosure. If you have missed one or more payments, a Chapter 13 bankruptcy will enable you to make up the payments over time and cure any defaults in your mortgage loan. If you have not missed any payments, you can discharge other debts that are unmanageable, and keep your house after the discharge from debt in a Chapter 7 bankruptcy. In Florida, there is an unlimited protection(exemption) for the equity in your homestead, which can not be taken away from you to protect creditors. Very few families filing for bankruptcy have to give up their homes if they have the income to afford their mortgage payments after other debts are discharged.

Once a petition for bankruptcy is filed, any foreclosure action or an Orlando homeowner is automatically halted. The law requires the mortgage company and its law firm to obtain permission from the bankruptcy court to continue the foreclosure action. This is usually granted, but takes approximately two months. In most situations, a chapter 7 bankruptcy will not allow you to keep your house, and the mortgage company will be permitted to complete the foreclosure process. However, if you qualify for a Chapter 13 repayment and debt restructuring plan, you may be able to stay in your home. You will need to keep your mortgage payments current while you complete your plan during the 3 to 5 year plan period. Your desire, and ability, to remain in your home will be an important factor in choosing whether to file under Chapter 7 or Chapter 13.

For individuals filing for bankruptcy in Orlando, the answer to this question depends on several factors, including whether your car is securing a loan, the value of the car and the amount of income available to you after the bankruptcy. Florida law provides an exemption of $1,000.00 of value in an automobile. This means that if the equity in an automobile exceeds $1,000.00, the trustee (who represents creditors) can sell the car to pay creditors if you are filing for a liquidation bankruptcy under Chapter 7. Although filing a bankruptcy petition puts a temporary halt to any repossession, the creditor may request permission from the bankruptcy court to take the vehicle. A reaffirmation agreement may be used to keep a vehicle that is secured with debt. For example, if you owe $15,000 on a car that is worth only $10,000.00, the creditor may be willing to “refinance” the car by allowing you to agree to pay $10,000.00 and keep the car. Some people can qualify for loans that allow them to keep the car and make lower payments after the bankruptcy. Others may keep their cars by paying the trustee with a negotiated amount that represents the non-exempt equity in the vehicle. These payments are usually made over a period of ten to twelve months after the bankruptcy is over. Keeping a car in bankruptcy can be a complicated issues, depending on the circumstances, and requires the advice of a knowledgable and experienced attorney.

If your current monthly income is below the Florida adjusted median income, then you automatically qualify. If your income is above the Florida adjusted median income, you may still qualify after expenses such as child care payments and retirement plan contributions are deducted from your income. This is called “means testing.” Our firm will assist you in evaluating your monthly income and expenses to ensure that you pass the means test if you are able, so that you can obtain a discharge. If you can not satisfy the requirements of the means test, then a Chapter 13 may be the best option for you. Read the page on this blog about Chapter 13 Bankruptcy to review some of the benefits that this form of bankruptcy relief can provide, especially for Orlando home owners who are “under water” with their mortgage loans.

Most bankruptcy lawyers charge a flat rate for assisting you in obtaining a discharge from the bankruptcy court. The fees may be more if your case involves a business, or if there are complicated issues in your case that require additional legal work. If you are comparing attorneys for the fee charged for filing a bankruptcy petition, you should ask what the flat rate fee includes. You should not be charged extra for events that are part of the basic bankruptcy process, such as attending the meeting of creditors, or assistance with preparing or reviewing a reaffirmation agreement. However, there are some bankruptcy cases which require additional legal services. These services bring you additional benefits that go beyond a successful discharge. Before retaining any lawyer to assist you in a bankruptcy proceeding, make sure you find out the total cost of the process and what services are included in the lawyer’s fees.

Please note that these fees do not include the filing fees, which in the Middle District of Florida are $299.00 for a Chapter 7 petition, and $276 for the filing of a Chapter 13 petition.

Because the law considers lawyers assisting consumers with their bankruptcy filings to be providing debt relief services, a lawyer should not accept payment for assisting you with bankruptcy with credit cards. Likewise, a lawyer should not counsel a client to go into further debt.

Most taxes are not dischargeable but there are some exceptions. If you filed your taxes with the IRS on time, and you owe regular income taxes that are over three years old, they are generally dischargeable. However, there are exceptions to this and you will need to consult with a knowledgeable bankruptcy attorney on this question to determine if a discharge would apply to your case. Chapter13 does have advantages over a Chapter 7 in this area.

Generally, a chapter 7 discharge will be granted about five months after the petition is filed with the bankruptcy court. Our office can assist you in preparing the petition as quickly as possible, but it usually takes most clients about a week or two to provide us with all the information needed for the petition.

A chapter 13 is a repayment plan with your creditors that is scheduled for three or five years, depending on your income level, and the value of your nonexempt assets.

A bankruptcy will remain on your credit record for no longer than ten years.

Make no mistake about it, filing bankruptcy is damaging to your credit report. It will remain on the report for a period of ten years. However, most individuals filing for bankruptcy already have distressed credit scores. Obtaining a discharge from debt allows you to begin rebuilding that credit score much sooner than continuing to struggle with the debt. The process of repairing your credit begins immediately after discharge, and most people are able to obtain loans for cars and homes within two to four years after their bankruptcy. This will of course depend on your particular situation.

If you are an individual, you may represent your self in bankruptcy court. However, the bankruptcy trustee is not responsible for giving you legal advice. Some non-lawyer “paralegals” offer services to help people fill out bankruptcy petitions. These individuals are not regulated or credentialed. We strongly advise against this – why would you pay a non-lawyer to help you with a legal matter?