South Florida's largest document company.
The Divorce & Bankruptcy Center
Call for a free consultation 954-946-4774
Allan J. Weltman
Family Mediator, Florida Supreme Court Certified County Mediator, Florida Supreme Court Qualified Arbitrator
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South Florida's largest document company. The Divorce & Bankruptcy Center Call for a free consultation 954-946-4774 Allan J. Weltman Family Mediator, Florida Supreme Court Certified County Mediator, Florida Supreme Court Qualified Arbitrator
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CHAPTER 7 BANKRUPTCY
Filing for bankruptcy puts into effect something called the "automatic stay." The automatic stay immediately stops your creditors from trying to collect what you owe them. So, at least temporarily, creditors cannot legally grab (garnish) your wages, empty your bank account, go after your car, house or other property, or cut off your utility service or welfare benefits. Until your bankruptcy case ends, your financial problems are in the hands of the bankruptcy court. It assumes legal control of the property you own (except your exempt property, which is yours to keep ) (See Florida Exemptions) and the debts you owe as of the date you file. Nothing can be sold or paid without the court's consent. You have control, however, with a few exceptions, of property you acquire after you file for bankruptcy. The court exercises its control through a court-appointed person called a "bankruptcy trustee." The trustee is mostly interested in what you own and what property you claim as exempt. This is because the trustee's primary duty is to see that your creditors are paid as much as possible on what you owe them. And the more assets the trustee recovers for creditors, the more the trustee is paid. The trustee goes through the papers you file and asks you questions at a short hearing, called the "creditors' meeting," which you must attend. After this meeting, the trustee collects the property that can be taken from you (your nonexempt property) to be sold to pay your creditors. You can either surrender the property to the trustee, pay the trustee its fair market value or, if the trustee agrees, swap some exempt property of equal value for the nonexempt property. If you've pledged property as collateral for a loan, the loan is called a secured debt. The most common examples are houses and motor vehicles. In most cases, you'll either have to surrender the collateral to the creditor or make arrangements to pay for it during or after bankruptcy. If you're involved in a contract or lease, and you or the other party still has obligations under it, the trustee may cancel it unless the contract will produce assets for the creditors. If it's canceled, you and the other party to the contract are cut loose from any contractual obligations. If after you file bankruptcy you change your mind, you can ask the court to dismiss your case. As a general rule, a court will dismiss a Chapter 7 bankruptcy case as long as the dismissal won't harm the creditors. Usually, you can file again if you want to. At the end of the bankruptcy process, most of your debts are wiped out (discharged) by the court. You no longer legally owe your creditors. You can't file for Chapter 7 bankruptcy again for another six years from the date of your filing. Will Bankruptcy Discharge Enough of Your Debts? Certain categories of debts cannot be discharged in Chapter 7 bankruptcy. These are called nondischargeable debts, and it doesn't make much sense to file for Chapter 7 bankruptcy if your primary goal is to get rid of them. For the purpose of deciding whether to file for bankruptcy, the main ones are: Back child support or alimony obligations, and debts considered in the nature of support, such as the obligation to pay attorneys fees for child support and custody modifications, and the obligation to pay marital debts or monthly payments in exchange for a division of the marital property. Court-ordered restitution Student loans that first became due fewer than seven years ago Taxes less than three years past due Condominium and cooperative association dues Court-judgments for injuries or death or someone arising from your intoxicated driving. The bankruptcy judge may rule any of the following debts non-dischargeable if the creditor objects in the bankruptcy court: Debts incurred on the basis of fraud, such as lying on a credit application or writing a bad check (One court has ruled that writing a bad check is not fraud in and of itself. That court said that for there to be fraud, you must state that the check is good when you write it.) Debts from willful or malicious injury to another or another's property, including assault, battery, false imprisonment, libel and slander Debts from larceny (theft), breach of trust or embezzlement. Debts arising out of a marital settlement agreement or divorce decree (that aren't otherwise automatically non-discharged as back support or alimony), such as credit card debts you owe to an ex-spouse to even up the property division. The court won't let you discharge these debts unless you prove that you need the money for basic support or to continue the operation of a business or that the benefit you'd receive by the discharge outweighs any detriment to your ex-spouse or children. As a general rule, if more than 50% of your debts are non-dischargeable, Chapter 7 bankruptcy's disadvantages probably outweigh the advantages. If you can discharge more than 50% of your debts, however, Chapter 7 bankruptcy may make sense; after you discharge, you should be in a better position than before to pay off the non-dischargeable debts. Even if the bulk of your indebtedness is from debts that are non-dischargeable only if the creditor files an objection with the court, it may still make sense to file for bankruptcy and hope your creditors don't object. You Recently lncurred Debts for Luxuries If you've recently run up large debts for a vacation, hobby or entertainment, filing for bankruptcy probably won't help you. Most luxury debts incurred just before filing are not dischargeable if the creditor objects. And running up unnecessary debts shortly before filing casts a suspicion of fraud over your entire bankruptcy case. Last-minute debts presumed to be non-dischargeable include: Debts of $ 1000.00 or more to any one creditor for luxury goods or services made within 60 days before fling, and Debts for cash advances in excess of $ 1,000.00 obtained within 60 days of filing for bankruptcy. You Notify Problem Creditors When the trustee mails your creditors official notice of your filing, the automatic stay goes into effect. The automatic stay prohibits creditors - at least temporarily - from taking any action directed toward collecting the debts you owe them. Creditors cannot: Undertake any collection activities witting letters or calling, for example) File lawsuits File contempt actions for delinquent support Terminate utilities or public benefits (such as welfare or food stamps) Proceed with a pending lawsuit (all lawsuits are put on hold pending the outcome of your bankruptcy case) Withhold money in their possession as a setoff for a debt or record liens against property. A creditor who undertakes any of these activities is considered in contempt of court and can be fined by the bankruptcy court. The court, however, can annul the automatic stay - that is, retroactively lift the stay from the moment it was imposed - and absolve the creditor of any wrongdoing. Creditors won't know to stop their collection efforts until they receive notice of your bankruptcy fling.
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