If you are struggling to keep up with your debt, bankruptcy may be the solution. Bankruptcy allows borrowers to stop all collection efforts and get a fresh start immediately. Phone calls, wage garnishments, foreclosure sales, and collections notices all must stop immediately after a bankruptcy is filed. Bankruptcy also provides for a discharge of debt to give people the fresh start they need to rebuild. Bankruptcy has a lot of benefits, but it is not right for every situation. If you are considering bankruptcy, contact a bankruptcy lawyer in Tampa to schedule a consultation.
How Common is Bankruptcy?
Bankruptcy is more common than you may think. In 2018, there were 755,185 bankruptcies filed in the United States. Studies show the average American now has approximately $38,000 in debt. For June 2019, there were 852 new bankruptcy cases filed in Tampa alone. Medical bills are a significant factor in the number of bankruptcy cases filed. A study by the American Journal of Medicine found that 62.1% of all bankruptcy cases are attributable to medical reasons. Further, the study found that 92% of the people filing bankruptcy for medical reasons had over $5,000 in medical debt.
The Three Types of Bankruptcy
Chapter 7: Commonly called liquidation bankruptcy. Chapter 7 involves the sale of non-exempt property to repay creditors. Not everyone is eligible for Chapter 7, as there are specific income limits that must be met.
Chapter 13: Also known as a reorganization bankruptcy. Chapter 13 involves the creation of a three to five-year payment plan to repay your debts. If you comply with your repayment plan, you should be allowed to keep your property and discharge the debt.
Chapter 11: This type of bankruptcy differs from Chapter 7 and Chapter 13 because it is designed to aid struggling businesses and corporations. The company typically continues to operate, but their finances are restructured to maximize repayment to creditors.
Where Do I File Bankruptcy?
Bankruptcy is filed in federal court. For individuals, the case is usually filed in the district where the borrower lives. For instance, if you reside in Tampa, the case may be filed in the U.S. Middle District of Florida. The residence will be based on the most recent 180 days before filing the case. If there have been multiple residences within the past 180 days, the filing should be where the most time was spent.
Generally, a business should file where the company is located. A corporation’s domicile will be the district where the business is incorporated. A domicile will not change unless a new one is acquired. See In Re Frame. On the other hand, the principal place of business will depend on the facts and circumstances of each case. For instance, many companies conduct business in multiple states and have locations throughout the country. In these types of situations, the principal place of business is the “nerve center “ of the business. See In Re Peachtree Lane Associates. The “nerve center” will be where the corporation’s primary business decisions were made within 180 days immediately preceding the bankruptcy.
For cases involving business partnerships, the venue will be based on either the principal place of business or the location of principal assets. Residence or domicile is not a proper basis for venue in bankruptcy cases filed by partnerships. See In Re Willow Ltd. Partnership. Instead, the court will look to the principal place or location of assets. The principal assets of a business are the assets primarily used in the operation of the business. The assets must be related to the business; investments may not be sufficient. See In Re Newport Creamery.
Documents Needed for Chapter 7 and Chapter 13
You will need access to information to complete the bankruptcy paperwork. Additionally, the bankruptcy trustee will require documents to verify your petition was correct. Therefore, prior to filing bankruptcy, you should compile the following information:
- A list of all your creditors, the nature of the debt, the amount owed to each, and their mailing addresses.
- Your source of income, how often you are paid, and how much you are paid. Additionally, the same income information will be required for your spouse. Your spouse’s information is needed even if your spouse is not filing bankruptcy with you. This is necessary for the court, the trustee, and your creditors to determine your household financial situation.
- A list of all your property (including real estate and personal items).
- A detailed list of your monthly living expenses, such as food, shelter, clothing, transportation, taxes, medicine, etc. These expenses must be reasonable and necessary for family maintenance.
Can I File Bankruptcy Jointly Without My Spouse?
Under Bankruptcy law, a married couple may file bankruptcy either individually or jointly as a married couple. See Bankruptcy law 11 USC 302. However, because a couple can file a joint bankruptcy, it does not mean they should jointly file bankruptcy. Deciding how to file bankruptcy should not be taken lightly; the decision can have long-lasting effects on your finances. If you need advice, you should contact a bankruptcy law firm in Tampa for assistance.
Married couples are the only parties allowed to file for bankruptcy jointly. If a couple intends to file bankruptcy jointly, they should do so in the initial petition. Courts have consistently rejected amendments to add a spouse after the case has been filed. See In Re Clinton. Further, the filing of a joint petition does not automatically entitle the couple to a joint administration or consolidation. Rather, under Bankruptcy Rule 1015, the court has the discretion to deny the joint administration or consolidation. However, joint petitions filed by a married couple are almost always administered jointly unless there is an objection.
Are There Benefits to Filing Bankruptcy With My Spouse?
Exempt property is the property that you do not have to forfeit when filing for Chapter 7 bankruptcy. A joint filing may entitle the couple to double the amount of some exemptions. For instance, the Florida exemption for a motor vehicle is only $1,000 in an individual bankruptcy case. However, when filing jointly, the exemption doubles to $2,000. Additionally, the personal property exemption of $1,000 increases to $2,000 when filed jointly. See In Re Hawkins. It is important to note; the remaining exemptions will remain the same and not increase by filing a joint petition. Therefore, a couple may be able to claim more exemptions by filing separate, individual petitions for bankruptcy.
The number of exemptions you are eligible for may significantly impact whether or not to file jointly. 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 bankruptcy, and your property does not qualify for an exemption.
Is Marital Property Safe in Bankruptcy
Under Florida family law, when a married couple jointly purchases a home or other personal property, it is presumed that the property will be held as tenancy by the entireties. In a tenancy by the entireties, the property is owned by the marital union, rather than by the individual spouses. This is an important fact to consider if you are contemplating filing bankruptcy when married.
Each party to the marriage has an undivided one-half interest in the marital union, which in turn owns the property. Thus, a creditor of one spouse may not place a lien on property held as a tenancy by the entirety without both spouses agreeing to do so. Therefore, if only one spouse agrees to give property held as tenancy by the entireties to a creditor as collateral for a loan, the creditor will not be able to force a liquidation of the property. Instead, the creditor will only have a lien on that spouse’s one-half interest in the tenancy by the entireties.
Liquidation Requirements for Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also known as liquidation bankruptcy. In Chapter 7, the borrower may be required to sell certain assets as a requirement of the case. Fortunately, not all of a debtor’s assets will be subjected to liquidation by the bankruptcy court. Florida bankruptcy law provides exemptions for many of the assets a debtor might own. If an asset is exempt from liquidation the borrower will not be required to sell the asset. To learn more about which assets may be protected in bankruptcy, click here.
The Means Test for Chapter 7
To be eligible to file Chapter 7 bankruptcy, you must pass the means test. The means-test requires borrowers to earn below a specified income. The income is based on the median income of similar household size. The median income is determined by the U.S. Census and is updated frequently.
The test is designed to weed out those who “need” bankruptcy from those who don’t. It was developed to keep people from abusing Chapter 7’ bankruptcy. You only have to pass the means test for Chapter 7 bankruptcy. Borrowers seeking relief under Chapter 13 will not be required to pass the means test. Additionally, the means test may not be applied in your case if you are a disabled veteran. Also, you may be exempt if your debt is primarily business-related debts, as opposed to consumer debts.
Is There a Credit Counseling Class for Bankruptcy
Yes, all borrowers are required to take a credit counseling class before filing bankruptcy. The class must be completed within the 180 days immediately preceding the bankruptcy filing. Once the course is complete, the debtor will need to file a statement of compliance with the bankruptcy court. The statement should include either a certificate or a statement that the debtor received the briefing but does not have a certificate. The certificate of completion should be filed along with your petition. If not included, the case may be rejected by the Court.
The class can be done on an individual basis or conducted in a group setting. Most often, borrowers take the class online from the comfort of their homes. You can usually even use a smartphone or tablet to complete the course. Private companies provide the course, you can use any company approved by the court. The fee will vary between class providers but is usually around $10.
How Much Does Chapter 7 Bankruptcy Cost?
The Court will charge filing fees for Chapter 7 bankruptcy. The fees will vary by Court. Some may be higher than others. For instance, the filing fee for Chapter 7 bankruptcy in Tampa is $335. If you needed to reopen a closed case, the Court would charge a fee of $260. There may be additional costs as well for your credit report and credit counseling class. Your lawyer will also charge a fee for their legal services.
How Much Does Chapter 13 Bankruptcy Cost?
As with Chapter 7, the filing fee for Chapter 13 will vary by filing location. For instance, the filing fee for Chapter 13 bankruptcy in Tampa is $310. There will also be fees for the credit report and credit counseling class. Additionally, the Court may charge a $45 fee for a mortgage modification requires. If you need to convert your Chapter 13 to a Chapter 7, there is a $25 fee.
The fees will be changed occasionally by the Court. You can access the fee schedule for the Middle District of Florida (Tampa Bay area, Jacksonville, and Orlando) by clicking here. For information on the fees charged by the Northern District of Florida (Gainesville, Panama City, Pensacola, and Tallahassee), click here.
Do I Have to Go to Court?
Yes, when a debtor files bankruptcy, they will be required to attend a meeting of the creditors. The meeting of creditors is commonly referred to as the 341 meeting because the meeting is required under section 341 of the bankruptcy code. Failure to attend the meeting can result in your case being dismissed. See In Re Lewis. Debtors are allowed to have their bankruptcy lawyer present with them at the meeting. If you filed for bankruptcy, it is strongly recommended to have your bankruptcy attorney present with you.
Are Creditors Required to Attend the 341 Meeting?
Creditors are not required but do have the option of being at the meeting. Usually, if creditors do attend, they will hire an attorney to appear on their behalf. However, creditors are usually most concerned with asset evaluation and location. Since most Chapter 7 cases have no assets, the cost of an attorney is usually not beneficial to creditors. If we do see creditors at the meeting, they are usually small, personal creditors.
A typical example is family members you borrowed money from. Whether or not these personal creditors decide to show up is much more unpredictable. If creditors attend the 341 Meeting they will have the right to ask the borrower questions.
When Does the Meeting of Creditors Occur?
Under bankruptcy law, the meeting of the creditors must take place between 20 and 40 days after the order for relief. The debtor will be required to attend the meeting and answer questions of the Trustee and creditors under oath. Only creditors and the Trustee will be allowed to question the debtor. The judge assigned the case, and equity security holders of a debtor corporation may not attend the meeting of creditors. In most cases, creditors do not attend the 341 meeting, and the Trustee will be the only party in attendance. The Trustee will typically inquire about the debtor’s income, expenses, assets, and debts. Debtors have the right to have their Tampa bankruptcy lawyer at their side during the meeting. Borrowers should take full advantage of this right to ensure they are not asked any improper questions.
The 341 meeting also acts as a deadline for creditors to file complaints to determine the dischargeability of debts. Under Bankruptcy Rule 4007, the complaint must be filed within 60 days after the first date set for the meeting of creditors. If the complaint is not filed within this time, the creditor may lose its right to file the complaint.
Preparing for the Meeting of Creditors
An experienced Tampa bankruptcy lawyer will typically spend a substantial amount of time preparing his client for the 341 meeting. The Trustee will usually question the debtor about the financial information submitted on the bankruptcy petition and schedules. The Trustee’s questions will be designed to help determine was if the debtor paperwork was accurate. The trustee will investigate if the borrower honestly and correctly represented their assets, income, and debts on the bankruptcy petition. Debtors must answer the questions accurately and truthfully at the 341 hearing. Providing false information to the Trustee or creditors at the 341 meeting can result in criminal charges.
You will need to bring your driver’s license (or other state-issued, non-expired identification) to the meeting. Additionally, you may be required to provide your social security card as well. We suggest arriving early to allow time to find your room and confer with your bankruptcy lawyer. Remember that this is a reasonably informal proceeding, but you will still want to dress professionally and act respectfully in the meeting.
How Long Does the 341 Meeting Last?
The U.S. trustee will oversee the meeting of creditors you have to attend. Often, bankruptcy trustees are expected to schedule five hearings for each half-hour slot on their schedule. This means that typically, these hearings are not long. However, should the trustee discover something that needs further questioning, the meeting will be extended. The trustee can conduct the hearing as long as necessary to resolve any outstanding questions they have. If necessary, the trustee can even continue the 341 meeting for a later date.
What is the Discharge of Debt?
The goal of bankruptcy is to give borrowers a fresh start. The new start is obtained by discharging the debt. The discharge is a court order releasing the borrower from personal liability on the debt. The discharge prohibits a creditor from taking any collection action against the borrower. See 11 U.S. 727. In most cases, obtaining a discharge will be the primary reason why a borrower files for Chapter 7 bankruptcy.
Borrowers should be cautious of objections to the discharge. Both the trustee and creditors can raise objections and prevent discharge. The objection can be to prevent the discharge of a specific debt or all of the debts. The most common objections raised involve acts by the borrower to hinder, delay, or defraud a creditor. Typical examples are hiding or undervaluing assets.
Can I File Bankruptcy Again?
Yes, borrowers can file bankruptcy more than once. However, there may be waiting periods to refile imposed by the Court. The length of the wait will depend on details of your previous case and type of new case you intend to file. Additionally, there may be limitations placed on the automatic stay protection. An automatic stay is enacted when a bankruptcy is filed to immediately stop all collection activity. If the previous case was dismissed and you refile within one year, the automatic stay lasts only 30 days. If you had multiple dismissals within one year of your new filing, no automatic stay will be granted.
When Can I File Chapter 7 Bankruptcy?
If you previously filed Chapter 7, you must wait eight years from the commencement date of your previous case. See Bankruptcy law 11 U.S.C. § 727. The “Commencement Date” is the day you filed your bankruptcy petition with the court. For example, if you filed on October 1, 2010, then you would have to wait until October 1, 2018, to file again.
Conversely, if you previously filed for Chapter 13, you only have to wait six years to file Chapter 7. The waiting period will begin on the commencement date of your previous case. Fortunately, there are some exceptions to the 6-year waiting period. If you paid your previous Chapter 13 payment plan in full you might not have to wait the entire 6 years. Additionally, if paid 70% of your payment plan in good faith, you may not have to wait to refile.
When Can I File Chapter 13 Bankruptcy Again?
The waiting period to refile a Chapter 13 is less than it is to refile a Chapter 7. If you previously obtained a discharge of debt in Chapter 13, you only need to wait two years to refile. On the other hand, if your previous case was a Chapter 7, you will need to wait four years. The 4-year waiting period begins on the commencing date of the last case. Filing a Chapter 13 and Chapter 7 is commonly referred to as Chapter 20.
How Will Bankruptcy Affect My Credit Score?
Credit scores are based on a multitude of factors. One of the factors that determine the credit score is the amount of debt a person has. Bankruptcy can assist with this by discharging debt a borrower may otherwise be obligated to pay. Another factor is open credit accounts with late payments; these accounts can significantly reduce your credit score. Fortunately, bankruptcy can assist with this aspect as well. If the debt is discharged in bankruptcy, the account should no longer be reported as an open delinquent account. For more information on how bankruptcy affects credit scores and how the score is calculated, click here.
The bankruptcy filing may last on your credit report for a few years. If you completed a Chapter 13 bankruptcy, the filing might remain on your credit report for seven years. On the other hand, Chapter 7 bankruptcy will stay on your credit report for up to 10 years. See MyFico.com.
If bankruptcy is on your credit, it does not mean you will be prevented from acquiring new debt. For instance, the waiting period for a mortgage may be a lot sooner. Many car loan lenders will have no waiting period at all; you may get a loan the very next day. The FHA and Veteran’s Association allows borrowers to qualify for a mortgage in just two years after the discharge. See FHA Regulation 4155.4.
How Does Debt Settlement Differ From Bankruptcy?
Debt settlement is a process in which you negotiate with your creditors to pay a reduced amount. To explore debt settlement, you need to have an income stream that will enable you to repay your creditors. Most creditors will only accept a settlement if the borrower can show they can afford it. If an agreement is reached, the remaining balance of the loan should be forgiven.
Unlike bankruptcy, you cannot force your creditors to accept less. A debt settlement only occurs if the creditor agrees to the proposal. Essentially, the creditor holds all the cards in debt settlements. Usually, the most considerable risk to the creditor will be the borrower filing bankruptcy. If bankruptcy is filed, the creditor’s power may be limited or non-existent.
Is Bankruptcy Better Than Debt Settlement?
Determining how to handle your debts is not an easy decision. It is essential to evaluate each option carefully to ensure that you choose the best option. The surest way to achieve this goal is to seek the guidance of a legal expert who knows the pros and cons of debt settlement and bankruptcy. By seeking the services of an experienced Tampa bankruptcy attorney, you can help ensure that you consider every angle during the decision making process.
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.
Consulta a 5 Star Bankruptcy Attorney in Tampa with Free Consultations
We invite you to contact Florida Law Advisers, P.A. to schedule a free consultation with a bankruptcy attorney at our firm. We will take the time to review your financial situation to see if bankruptcy is the best option to help you get out of debt. At Florida Law Advisers, P.A., we understand that filing for bankruptcy can be a very confusing and intimidating process. That is why we work so hard to make the process as easy as possible for our clients.
Our Tampa bankruptcy attorneys have years of experience helping people solve their financial problems and obtain a fresh start. Regardless, whether you need help with Chapter 13, Chapter 7, or other forms of debt relief, our professional legal team can help. Call 800 990 7763 to speak with a bankruptcy attorney at our firm today.