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Bankruptcy Attorneys

Bankruptcy FAQs

1. What is bankruptcy?

Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. In most cases, filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.

2. What can bankruptcy do for me?

Bankruptcy may make it possible for you to:

Eliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of debts. It is designed to give you a fresh financial start.
Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy can, in rare instances, eliminate or modify certain mortgages and other liens on your property without payment.)
Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
Restore or prevent termination of utility service.
Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

3. What can bankruptcy not do?

Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:

Eliminate certain rights of “secured” creditors. A creditor is “secured” if it has taken a mortgage or other lien on property as collateral for a loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money on the debt if you decide to give back the property. But you generally cannot keep secured property unless you continue to pay the debt.
Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, most student loans, court restitution orders, criminal fines, and most taxes.
Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
Discharge debts that arise after bankruptcy has been filed.

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4. What different types of bankruptcy cases should I consider?

There are four main types of bankruptcy cases for individuals provided under the law:

Chapter 7 is known as “straight” bankruptcy or “liquidation.” It requires an individual to give up property which is not “exempt” under the law, so the property can be sold to pay creditors. Generally, those who file chapter 7 keep most, if not all, of their property except property which is very valuable or which is subject to a lien which they cannot avoid or afford to pay.
Chapter 11, known as “reorganization,” is used by businesses and a few individuals whose debts are very large. •Chapter 12 is reserved for family farmers and fishermen.
Chapter 13 is a known as a “wage-earners plan” and is used by individuals to pay all or a portion of their debts over a period of years using their current income. Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.

5. What must I do before filing bankruptcy?

You must receive budget and credit counseling from an approved credit counseling agency within 180 days before your bankruptcy case is filed. The agency will review possible options available to you in credit counseling and assist you in reviewing your budget. Different agencies provide the counseling in-person, by telephone, or over the Internet. If you decide to file bankruptcy, you must have a certificate from the agency showing that you received the counseling before your bankruptcy case was filed, with exceptions given for active military serving in a combat zone, people who are incapacitated and other exigent circumstances.

Most approved agencies charge reasonable amounts for the pre-filing counseling. However, the law requires approved agencies to provide bankruptcy counseling and the necessary certificates without considering an individual’s ability to pay.

If you cannot afford the fee, you should ask the agency to provide the counseling free of charge or at a reduced fee. If you decide to go ahead with bankruptcy, you should be very careful in choosing an agency for the required counseling. It is extremely difficult to sort out the good counseling agencies from the bad ones. Many agencies are legitimate, but many are simply rip-offs. Being an “approved” agency for bankruptcy counseling is no guarantee that the agency is good. It is also important to understand that even good agencies won’t be able to help if you are in too much financial trouble.

Some of the approved agencies offer debt management plans (also called DMPs). A DMP is a plan to repay some or all of your debts in which you send the counseling agency a monthly payment that it then distributes to your creditors. Debt management plans can be helpful for some consumers. For others, they are a terrible idea. The problem is that many counseling agencies will pressure you into a debt management plan as a way of avoiding bankruptcy whether it makes sense for you or not. You should not consider a debt management plan if making the monthly plan payment will mean you will not have money to pay your rent, mortgage, utilities, food, prescriptions, and other necessities. It is important to keep in mind these important points: •Bankruptcy is not necessarily to be avoided at all costs. In many cases, bankruptcy may actually be the best choice for you.

If you sign up for a debt management plan that you can’t afford, you may end up in bankruptcy anyway (and a copy of the plan must also be filed in your bankruptcy case).
There are approved agencies for bankruptcy counseling that do not offer debt management plans. It is usually a good idea for you to meet with a bankruptcy attorney before you receive the required credit counseling. Unlike a credit counselor, who cannot give legal advice, an attorney can provide counseling on whether bankruptcy is the best option. If bankruptcy is not the right answer for you, a good attorney will offer a range of other suggestions. The attorney can also provide you with a list of approved credit counseling agencies, or you can check the website for the United States Trustee Program at www.justice.gov/ust/eo/bapcpa/ccde/CC_Files/CC_Approved_Agencies_HTML/ cc_florida/cc_florida.htm. Be sure to look up courses in the appropriate district.

6. What will happen to my home and car if I file bankruptcy?

In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt you will be able to keep it if you pay its non-exempt value to creditors in chapter 13.

However, some of your creditors may have a “security interest” in your home, automobile, or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.

In a chapter 13 case, you may be able to keep certain secured property by paying the creditor the value of the property rather than the full amount owed on the debt. You can also use chapter 13 to catch up on back payments and get current on the loan.

There are also several ways that you can keep collateral or mortgaged property after you file a chapter 7 bankruptcy. You can agree to keep making your payments on the debt until it is paid in full or you can pay the creditor the “replacement value” for the property you want to keep. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods and furniture, tools or books of your trade, or professionally prescribed health aids as collateral for a separate loan, you can usually keep that property without making any more payments on that debt.

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7. Can I Own Anything After Bankruptcy?

Yes! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and typically all that you obtain after the bankruptcy is filed. However, if you receive an inheritance, money from certain types of property settlements, or life insurance proceeds within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.

8. Will Bankruptcy Wipe Out All My Debts?

Bankruptcy will wipe out all unsecured debts with the following exceptions:

Money owed for child support or alimony;
Most fines and penalties owed to government agencies;
Most taxes and debts incurred to pay taxes;
Student loans, unless you can prove to the court that repaying them will be an “undue hardship;”
Debts not listed on your bankruptcy petition;
Loans you received by knowingly giving false information to a creditor, who reasonably relied on it in offering you the loan;
Debts resulting from “willful and malicious” harm;
Debts incurred by injuring someone while driving under the influence of drugs or alcohol;
Mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor, i.e. a deficiency judgment can be discharged in bankruptcy).

9. Will I Have to Go to Court?

In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to come. Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear at a hearing. In a chapter 13 case, you may also have to appear at a hearing when the judge decides whether your plan should be approved. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney and your attorney will attend with you.

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10. What else must I do to complete my case?

After your case is filed, you must complete an approved course in personal finances. This course will take approximately two hours to complete. Many of the course providers give you a choice to take the course in-person at a designated location, over the Internet (usually by watching a video), or over the telephone. Your attorney can give you a list of organizations that provide approved courses, or you can check the website for the United States Trustee Program office at www.justice.gov/ust/eo/bapcpa/ccde/DE_Files/DE_Approved_Agencies_HTML/ de_florida/de_florida.htm. Be sure to look up courses in the appropriate district. If you cannot afford the fee, you should ask the agency to provide the course free of charge or at a reduced fee. In a chapter 7 case, you should sign up for the course soon after your case is filed. If you file a chapter 13 case, you should ask your attorney when you should take the course.

11. What are secured and unsecured debts?

Unsecured debts are debts which are not “secured” by any collateral. These can include personal loans, credit cards issued by banks, such as Visa, MasterCard, American Express, or Discover, and other credit cards used to purchase consumable items. Vehicle leases are unsecured debts. Medical bills and personal loans are also unsecured debts.

Secured debts are those which are “secured” by some kind of property as collateral to guarantee payment for the debt. These typically include mortgages, car loans, loans from finance companies, which can be secured by purchases of household items, furniture, computers or electronics. If you purchase goods using a store based credit card, like Best Buy or Rooms to Go, the store typically asserts that they are a secured creditor as the credit agreement gives them a security interest in the financed items.

12. Do I still owe secured debts (mortgages, car loans) after bankruptcy?

Yes and No. The term “secured debt” applies when you give the lender a mortgage, deed of trust, or lien on property as collateral for a loan. The most common types of secured debts are home mortgages and car loans. The treatment of secured debts after bankruptcy can be confusing.

Bankruptcy cancels your personal legal obligation to pay a debt, even a secured debt. This means the secured creditor cannot sue you after a bankruptcy to collect the money you owe.

However, the creditor can still take back their collateral if you don’t pay the debt. For example, if you are behind on a car loan or home mortgage, the creditor can ask the bankruptcy court for permission to repossess your car or foreclose on your home. In the alternative, the creditor can just wait until your bankruptcy is over and then foreclose or seek to repossess. Although a secured creditor cannot sue you if you do not pay, that creditor can usually take back the collateral.

For this reason, if you want to keep property that is collateral for a secured debt, you will need to catch up on the payments and continue to make them during and after bankruptcy, keep any required insurance, and you may have to reaffirm the loan.

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13. What is an automatic stay?

The “automatic stay” provision of the bankruptcy code provides substantial protections to debtors. Once a petition is filed, a stay automatically prohibits creditors from continuing any collection activity or executing a judgment until the bankruptcy case closes, is dismissed or at any time, as to any particular property, that is no longer deemed part of the “estate.” It can even temporarily stop a foreclosure sale minutes before finalizing. There is no notice requirement and any creditor acting in willful violation of the stay will be required to pay damages, including costs and attorney’s fees. Just remember, the automatic stay does not begin when you hire a bankruptcy attorney. It only begins after you file your bankruptcy petition.

If you had a prior bankruptcy case dismissed within the past year, the “automatic stay” is in effect only for 30 days, unless you move for extension and show good faith. If you had two cases dismissed in the prior year, then there is no automatic stay at all and the debtor must ask the court for a stay within 30 days of filing and show good faith. Without these limitations, debtors could “game” the system by filing a petition back to back with other previously dismissed petitions which would then make the stay essentially permanent.

14. What does “surrendering” property do?

Part of filing a chapter 7 involves making a statement of intention as to your property within 30 days of filing your petition. You have the choice to surrender or retain the property and each has different consequences. Should you retain the property you can choose to 1) redeem the property (retain by paying the creditor the current “replacement value”), 2) reaffirm the debt, 3) simply retain and keep paying, or 4) claim the property as “exempt.” (see below for more information on these options). Should you instead surrender secured property, the property will typically be sold by the trustee and the creditor, who lent money based on that particular collateral or security, may not sue you personally for any additional money.

15. What is “redeeming” a debt?

You may be able to keep collateral on a secured debt by paying the creditor in a lump sum the amount the item is worth rather than what you owe on the loan. This is your right under the bankruptcy law to “redeem” the collateral.

Redeeming collateral can save you hundreds of dollars. Because furniture, appliances, and other household goods go down in value quickly once they are used, you may redeem them for less than their original cost or what you owe on the account.

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16. What is reaffirmation?

Although you filed bankruptcy to cancel your debts, you have the option to sign a written agreement to “reaffirm” a debt. If you choose to reaffirm, you agree to be legally obligated to pay the debt despite bankruptcy. If you reaffirm, the debt is not canceled by bankruptcy. If you fall behind on a reaffirmed debt, you can receive collection calls, be sued, and possibly have your pay attached or other property taken.

Reaffirming a debt is a serious matter. You should never agree to a reaffirmation without a very good reason.

17. Do I have to reaffirm any debts?

No. Reaffirmation is always optional. It is not required by bankruptcy law or any other law. If a creditor tries to pressure you to reaffirm, remember you can always say no. Remember to contact your attorney if any creditor contacts you about reaffirming a debt or any matter during the bankruptcy.

18. Can I change my mind after I reaffirm a debt?

Yes. You must enter into a reaffirmation agreement within 45 days after the first meeting of the creditors but you can cancel up to sixty days after it is filed with the court or at any time prior to discharge, whichever occurs later. To cancel a reaffirmation agreement, you must notify the creditor in writing. You do not have to give a reason. Once you have canceled, the creditor must return any payments you made on the agreement.

Also, a reaffirmation agreement has to be in writing, has to be signed by your lawyer or approved by the judge. Any other reaffirmation agreement is not valid.

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19. Do I have to reaffirm on the same terms?

No. A reaffirmation is a new contract between you and the lender. You should try to get the creditor to agree to better terms such as a lower monthly payment or interest rate. You can also try to negotiate a reduction in the amount you owe. The lender may refuse but it is always worth a try. The lender must give you disclosures on the reaffirmation agreement about the original credit terms, and any new terms you and the lender agree on must also be listed.

20. Do I have to reaffirm car loans, home mortgages?

If you are behind on a car loan or a home mortgage and you can afford to catch up, you can reaffirm and possibly keep your car or home. If the lender agrees to give you the time you need to get caught up on a default, this may be a good reason to reaffirm. However, if you were having trouble staying current with your payments before bankruptcy and your situation has not improved, reaffirmation may be a mistake. The collateral is likely to be repossessed or foreclosed anyway after bankruptcy, because your obligation to make payments continues.

If you have reaffirmed, you could then be required to pay the difference between what the collateral is sold for and what you owe via a deficiency judgment. If you are up to date on your loan, you may not need to reaffirm to keep your car or home. Some lenders will let you keep your property without signing a reaffirmation as long as you continue to make your payments. Sometimes lenders will do so if they think the bankruptcy court will not approve the reaffirmation agreement.

21. And what about credit cards and department store cards, should I reaffirm those?

It is almost never a good idea to reaffirm a credit card. Reaffirming means you will pay bills that your bankruptcy would normally wipe out. That can be a very high price to pay for the convenience of a credit card. Try paying cash. You will mostly likely be able to get a new credit card after, or sometimes even during the bankruptcy and that new card will not come with alarge unpaid balance!

Some department store credit cards may be secured. The things you buy with the credit card may be collateral. The store might tell you that they will repossess what you bought, such as a TV, washer, or sofa, if you do not reaffirm the debt. Most of the time, it is much less likely that a department store would repossess used merchandise.

However, repossession is possible in a store credit scenario. You have to decide how important the item is to you or your family. If you can replace it cheaply or live without it, then you should not reaffirm. You can still shop at the store by paying cash, and the store may offer you a new credit card even if you do not reaffirm. (Just make sure that your old balance is not added into the new account.) For Example: Some offers to reaffirm may seem attractive at first. Say a department store allows you to keep your credit card if you reaffirm $1,000 out of the $2,000 you owed before bankruptcy. They say it will cost you only $25 per month and they will also give you a $500 line of credit for new purchases. What they might not tell you is that they will give you a new credit card in a few months even if you do not reaffirm. More importantly, you should understand that you are agreeing to repay $1,000 plus interest that the law says you can have legally canceled. That is a big price to pay for $500 in new credit.

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22. Should I reaffirm any debt?

Remember, if you choose to reaffirm, you are agreeing to be legally obligated to pay a debt which in some instances would have been discharged in bankruptcy.

If you are thinking about reaffirming, the first question should be can I keep this property without reaffirming? Next, can I afford the monthly payments. Reaffirming any debt means that you are agreeing to make the payments every month, and face the consequences if you do not. The reaffirmation agreement must include information about your income and expenses and your signed statement that you can afford the payments.

If you have any doubts whether you can afford the payments, do not reaffirm. Caution is always a good idea when you are giving up your right to have a debt canceled.

Before reaffirming, seek legal counsel who can help you consider other options.

23. What is “avoiding” a lien?

One of the most far-reaching powers a debtor has in bankruptcy is the power to nullify or “avoid” a lien on protected property or nullify and reverse a transfer of exempt property which was transferred against your will. Through proper motion in accordance with the Federal Rules of Bankruptcy Procedure, and with the help of a qualified attorney at Rosen & Rosen, we can seek to nullify certain liens such as judicial liens, certain liens on household goods and furnishings you already have, liens on books or tools of your trade or liens on professionally prescribed health aids.

24. What else should I know?

Utility services—Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.

Discrimination—An employer or government agency cannot discriminate against you because you have filed for bankruptcy. Government agencies and private entities involved in student loan programs also cannot discriminate against you based on a bankruptcy filing.

Driver’s license—If you lost your license solely because you could not pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back.

Co-signers—If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt. If you file under chapter 13, you may be able to protect co-signers, depending upon the terms of your chapter 13 plan.

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25. How do I find a bankruptcy attorney?

As with any area of the law, it is important to carefully select a bankruptcy lawyer who will respond to your personal situation. The attorney should not be too busy to meet you individually and to answer questions as necessary.

The best way to find a trustworthy bankruptcy attorney is to seek recommendations from family, friends or other members of the community, especially any attorney they know and respect. You should carefully read retainers and other documents the attorney asks you to sign. You should not hire an attorney unless he or she agrees to represent you throughout the case.

In bankruptcy, as in all areas of life, remember that the person advertising the cheapest rate is not necessarily the best. You might save money in the short run but in the long run, you may lose rights to property or money that you might not have lost with proper bankruptcy planning from a qualified and well-informed attorney.

Document preparation services also known as “typing services” or “paralegal services” involve non-lawyers who offer to prepare bankruptcy forms for a fee. Problems with these services often arise because non-lawyers cannot offer advice on difficult bankruptcy cases and they offer no services once a bankruptcy case has begun. There are also many shady operators in this field who give bad advice and defraud consumers.

When first meeting a bankruptcy attorney, you should be prepared to answer the following questions:

What types of debt are causing you the most trouble?
What are your significant assets? •How did your debts arise and are they secured?
Is any action about to occur to foreclose or repossess property, to attach your wages or bank account, or to shut off utility service?
What are your goals in filing the case?

26. Can I file bankruptcy without an attorney?

Although it may be possible for some people to file a bankruptcy case without an attorney, it is not a step to be taken lightly. The process can be very difficult and you may lose property or other rights if you do not know the law. It takes patience and careful preparation. Chapter 7 cases can be somewhat more straight forward; however, very few unrepresented people have been able to successfully file a chapter 13 case on their own.

Remember, the law often changes. Each case is different. This webpage is meant to give you general information and not to give you specific legal advice.

If you or anyone you know is considering filing for bankruptcy, call or contact our bankruptcy attorneys today. Let the lawyers of Rosen & Rosen serve you!

We are a debt relief agency. In addition to other legal services, we help clients file for bankruptcy relief under the Bankruptcy Code.

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