In simple terms, bankruptcy is the legal process whereby an individual who owes more money than they can, at that present time, repay, have their non-exempt debts or in other words, dischargeable debts eliminated. This is done under (chapter 7) or repay, over time, usually at a reduced rate, some of the money owed while continuing to keep assets, (under chapter 13). The bankruptcy code and Federal Rules of Bankruptcy state in which situation each of the 13 Chapters can be used, which debts can be eliminated, and when there is repayment, how this should be set up in amount and time. The Federal Government determines the guidelines for a bankruptcy, while each state has district courts that handle judicial rulings. So, while each individual case is different, the rules of filing will be different across the U.S. Also, each state has their own list of what debts can and cannot be exempt as well as the Federal Government having their own list of exemptions. Florida, however, does not allow the use of Federal exemptions but just uses their own list. Filings take place at the courthouse in the debtor’s county of residence where the debtor has lived for at least the previous 180 days. If a person has not resided in their present county for l80 days they then must file in their previous county of residence. Further, the person must have legally resided in Florida for 730 days before they can take Florida exemptions or the debtor must take the exemptions of the state they were living in the most, 180 days prior to filing. Before looking at Chapter 7 and 13 in more detail, there are a number of key terms involving bankruptcy that are helpful to understand.
Filing a petition for Bankruptcy is done after the decision is made as to which chapter is appropriate to use for filing and all the necessary paper work and forms have been filled out. The petition is filed with the clerk at the county courthouse of the filer’s legal residence.
Filing Code is determined by a number of factors including, but not limited to, whether debt is secured or unsecured, and what non-exempt properties the filer wants to personally retain, such as a home, vehicle, boat, or other valuable assets. Income and availability to pay incurred debts is also an important factor.
Means Test is for persons hoping to file a Chapter 7 bankruptcy. This shows the income level one must not exceed, depending on number of persons in the household to qualify to file under Chapter 7.
Case Number indicates the court office location, year of filing, type of case, number and judge assigned to the case.
Notice of Commencement is the notice sent to all the creditors of the filing for bankruptcy.
Automatic Stay refers to the fact that following filing of the bankruptcy petition creditors must stop all collection action, including harassment, against the debtor for a period of time unless given permission from the bankruptcy court to do otherwise.
Debtor is the person who is unable to pay the amounts owed for both secured and unsecured debt.
Pro So Debtor is a person who files a petition for bankruptcy without an attorney.
Creditor is the person, company, business or other entity to which the debt is owed.
Secured Debt is debt, which is “secured” by collateral, most frequently a home or vehicle. This type of debt is usually for large amounts of money as the debtor is more likely to repay the amount borrowed if losing pledged collateral is at risk when payment is not made.
Unsecured Debt is debt obtained with no collateral and usually refers to credit cards, store credit, student loans, and personal loans. The amounts of these debts are usually smaller than secured debts.
United States Trustee When a person files a bankruptcy petition a person known as a United States trustee is appointed to collect and handle non-exempt assets of the debtor. These collected assets are referred to as the debtor’s Estate. In Chapter 7 the trustee may sell non-exempt properties and belongings of value forming the estate, and the proceeds used to help reduce the debt. In Chapter 13 the trustee oversees developing the repayment plan and can receive these payments as well as see they are properly dispersed.
341 Meeting is called the “meeting of creditors” and is held approximately 40 days following the filing of the bankruptcy petition. All creditors are notified but are not required to attend. The debtor, however, is required to attend, to present a picture I D, proof of social security number, and under oath, answer questions from the creditors. Failure of the debtor to appear can result in the case being dismissed.
Credit Counseling Certificate is required of all persons filing for bankruptcy. This certificate must be obtained during the 180 days prior to filing. The course must be taken and completed at an approved, non-profit, credit counseling agency.
Repayment Plan is the plan developed by the trustee, the debtor, and the attorney (when one is used) in reorganizing debt under Chapter 13. Assets are usually kept and any secured and unsecured debt will be factored in. Repayment is usually from 3 to 5 years with some debts being reduced in amount and the total monthly payments less than what were previously. If the debtor fails to make the required monthly payments then Chapter 7 may be invoked and retained assets, which are non-exempt, will be forfeited and liquidated with profits helping to reduce debt.
Exemptions as mentioned earlier, Florida does not use the Federal Government’s list of exemptions but instead uses their own list entirely. An exemption helps to determine which assets, properties, and belongings a party gets to keep. This list plays a large role in a Chapter 7 or Chapter 13 bankruptcy. If a Chapter l3 is filed most of the assets will be kept as debt is essentially being reorganized and these assets will eventually be paid for. However, in Chapter 7 the exemption list is most important as non-exempt assets will be collected and sold (see above under United States Trustee). The Florida list of exemptions includes, but is not limited to:
To view the sub categories and the entire list of Florida exemptions review the Florida Statutes of Bankruptcy or The Florida Constitution. Better yet, speak to an attorney knowledgeable in bankruptcy. Attorney Gisondo practices in West Palm Beach and if you live in Palm Beach, Martin, St. Lucie, Miami-Dade, Broward, Orange, or Hillsborough county he can help you determine your exemptions as well as help you through the entire bankruptcy litigation.
Dischargeable Debts are debts, which can and may be eliminated following the litigation of a Chapter 7 and less frequently Chapter l3 bankruptcies. These debts can include but are not limited to:
Check with an attorney regarding dischargeable debts when filing a Chapter 13 bankruptcy, as this is a difficult area to explain in a few words.
Non-Dischargeable Debts are debts, which usually cannot be eliminated in a bankruptcy, and include, but are not limited to:
Again, see the Florida Statutes and Constitution or ask an attorney for the complete list of non-dischargeable debts.
Length of Time Bankruptcy Filing Remains on a Credit Report maximum of 10 years
A Chapter 7 bankruptcy is designed for those who, due to financial hardships, are unable to pay the debts on their non-exempt assets, belongings and monies owed and do not plan to keep these assets or belongings. Their non-exempt assets will be called an estate and collected and liquidated by the appointed United States Trustee who will then use the proceeds to distribute among creditors. When the bankruptcy litigation is complete, the dischargeable debts will be eliminated and the person filing will no longer owe any monies to those creditors and the creditors can no longer pursue the debtor for payment of any kind.
Chapter 13 bankruptcy is for individuals only. It is frequently referred to as the Reorganization Chapter as most debts filed under this chapter will be reorganized as to amount and monthly payments, both usually lower than before filing. The United States Trustee will oversee the creating of a reasonable repayment plan to be used for a period of usually three to five years and will also collect the payments when necessary. Additionally, some debts may be eliminated or discharged and sometimes a reduction in principal owed on secured debts is permitted. Secured items, collateral, will be kept by the debtor, as will be most non-exempt assets. If, however payments are not made in a timely manner at any point in the new repayment plan, a Chapter 7 bankruptcy may be filed and non-exempt assets will be collected and sold, the proceeds going to help offset debts. In Florida there are a few restrictions and qualifications for an individual wanting to file bankruptcy under Chapter 13. An attorney is the best source to learn what these restrictions and qualifications entail.
The old saying “it’s a jungle out there” most definitely applies to filing for bankruptcy. The information given here is really just the tip of the iceberg and of course every case is different as well. While hiring an attorney requires a fee, it is to a person’s benefit to do so as the final results of either a Chapter 7 or a Chapter l3 bankruptcy are far more likely to be financially successful, above and beyond the fee. Attorney’s have already spent many hours studying the myriad of factors associated with bankruptcy in their state and can counsel and help you through the entire “jungle” of bankruptcy. For Florida counties Palm Beach, Martin, St. Lucie, Miami-Dade, Broward, Orange, and Hillsborough, Attorney Gisondo offers a free, initial, in-office, consultation where he will meet personally with a potential client to answer their questions, explain his fees, and relate how he can best help. Call his office in West Palm Beach at (561) 530-4568 for an appointment.