Filing A Chapter 7 Bankruptcy
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A bankruptcy starts with the filing of an official petition in the bankruptcy court and a lengthy document called a Statement of Financial Affairs. This statement contains numerous schedules requiring a detailed list of all your debts, including:
- All priority debts (including taxes)
- All “secured” debts (including home mortgages and auto loans) that have property as “collateral”
- All unsecured debts of any kind (credit cards, etc.)
Other information that must be provided on the Statement of Financial Affairs includes:
- The names and addresses of the creditors
- A list of all assets, including real estate and all forms of personal property
It is very important that your statement of financial affairs be completed accurately. Debts that are not listed on your statement will not be discharged at the completion of the bankruptcy proceeding. Failure to list assets in an attempt to hide them from your creditors may result in serious consequences, including the denial of discharge or charges of bankruptcy fraud.
Upon filing of your Statement of Financial Affairs, your creditors are immediately prevented from trying to collect on your debts through what is called an automatic stay. The stay is designed to preserve your property and to give you a timeout from litigation.
Anyone you owe – or anyone who wants to continue collection proceedings during your bankruptcy must show the bankruptcy judge, after a hearing, that there is “cause” to be allowed to continue with collection action (for instance, by showing that the property might deteriorate in value during the bankruptcy process).
The trustee takes control of any property you do not get to keep. From the sale of your property, the trustee pays the expenses of the administration of the case, and then gives any remaining money to creditors with allowed claims, according to the priority of the claims (with claims that are “secured” by property being paid first). Any wages you earn after you file the case are yours, beyond the reach of creditors who had claims on the date you filed for bankruptcy.
The 341 Meeting
After your bankruptcy is filed, you must appear at the first meeting of creditors. The trustee can ask you questions under oath about your property and debts. Creditors can also question you on those subjects, but seldom do. Generally, the only responsibility you have after the 341 meeting is to cooperate with the trustee in providing any requested information. Creditors have 60 days after the 341 meeting to convince the bankruptcy court you shouldn’t be allowed to discharge or in layman’s terms walk away from your debts. The trustee may review your income and expenses to see if you have enough money left after your current living expenditures to pay something to creditors.
What you can keep in Florida
You can claim a homestead exemption and keep the property where you live, as long as it’s not larger than 1/2 acre inside a municipality or 160 connected acres elsewhere. A bankruptcy doesn’t wipe out voluntary liens, like mortgages and deeds of trust, or tax liens. So the lender still has the right to foreclose if you don’t pay. If you pay, everyone is happy. Remember, the lender doesn’t want the property; it wants you to pay regularly on the loan. Foreclosure is a last resort for the lender if it concludes it can’t get the owed money any other way.
You can exempt a motor vehicle up to $1,000 in equity, any personal property up to $1,000 (spouses can double), and any health aids. If you still owe money on the car, you can choose to reaffirm the debt to the secured lender. Under the new law, you have to reaffirm your car loan within 45 days after the “341 meeting.” You no longer have the option of continuing your car payments without reaffirming the loan. Once the loan is reaffirmed, if you default on your payments and the car is repossessed, you are liable for the repossession deficiency.
You also have the option to redeem the car within 45 days of the 341 meeting by buying it from the secured creditor in a single payment for its present value. Under Florida bankruptcy laws, you can keep:
- Unemployment, disability, veterans’ and social security benefits
- Retirement plan and life insurance proceeds
- Business partnership property
- Any personal property, up to $1,000 in value
- Any professionally prescribed health aids
- Crime victim and workers’ compensation
For more information on what is exempt and what is not, please click here.
If you or a loved one is suffering from financial difficulties and feel that filing for bankruptcy is your only option, contact us today for a free consultation. Take the first step to regaining control of your financial future.