Below you will find some information about Bankruptcy Chapter 7 and Chapter 13. The information provided is general in nature and is not intended as legal advise nor does it create an attorney client relationship. Instead it is for educational purposes only. We hope that it provides you with a general idea of bankruptcy and the process.
WHY FILE FOR BANKRUPTCY
A stated purpose for bankruptcy is to provide the honest debtor a fresh start. Bankruptcy may provide relief from creditors and ultimately the debt. It is the relief from debt that advances the policy goal of providing a fresh start. It can also be used to cure a default and help a debtor save property.
THE AUTOMATIC STAY
The first usual benefit of filing a bankruptcy petition under either Chapter 7 or Chapter 13 is the law which requires an automatic stay that stops most all collection efforts while the bankruptcy case is pending. As the name implies, the stay is automatic and comes into existence immediately upon filing the petition.
The Automatic Stay in Bankruptcy May Stop:
Creditor Phone Calls
Garnishments
Law Suits
Foreclosures
Repossession Efforts
Acts to perfect a lien
Driver's license suspension under FL. financial responsibility law.
The automatic stay is temporary. Assuming there hasn't been any prior court orders or bankruptcy filings effecting the stay and that the bankruptcy filing is valid, the stay provides protection from most creditors during the bankruptcy process. If and when a discharge is entered the stay is replaced by a permanent injunction against attempts to collect debts that have been discharged.
EXEMPTIONS AND
KEEPING PROPERTY
A common goal in bankruptcy is to lose the debt but keep property. Exemptions are used to keep property out the bankruptcy estate. However, exemptions are limited in number and some are limited by dollar amounts. They are also subject to state law and not uniform for all states. Consequently, knowing the applicable exemptions before filing is very important. The exemptions may determine what property a client keeps or loses and in the case of a Chapter 13, may effect the Chapter 13 Plan payment amount.
Many Chapter 7 cases are no asset cases. That means the people were able to exempt all of their property.
Please bear in mind that exempting property may keep it out of the bankruptcy estate but if the property is subject to a lien the client may still need to pay the creditor or surrender the property to that creditor.
Don't get caught by surprise on exemptions. It's important to know in advance if there is a risk of losing property. There is an obligation to disclose all of the petitioner's assets. Failing to disclose assets or hiding property will increase the risk of a bad outcome in bankruptcy. Instead, we use the exemptions to their fullest and prepared our client to buy back or turn over the non-exempt assets to the Trustee.
THE TRUSTEE
If a Chapter 7 or Chapter 13 Bankruptcy Petition is filed, a Trustee will be assigned to the case. An important function of a Trustee is to administer the bankruptcy estate. In a Chapter 7 that means liquidating the non-exempt assets, if any, and paying creditors their share. In a Chapter 13, the Trustee collects the Chapter 13 Plan payments and distributes the funds to the creditors pursuant to a confirmed plan.
The Trustees do have other functions, such as examining the debtor at a §341 meeting. The meeting is also known as a meeting of the creditors. Even though it is called a meeting of the creditors they rarely attend.
The Trustee may file various motions in the case. The Trustees working the cases in the Tampa Division are, in my opinion, good people and they try to be fair. But they have a job to do and their view of what should be done may be different from the debtor's view. Consequently, a Trustee in bankruptcy can be like a built-in adversary. An attorney or lawyer with experience may be able to resolve issues with the Trustee and more importantly, may be able to prevent issues from arising in the case.
THE DISCHARGE
A discharge in bankruptcy terminates the legal obligation to pay the debts that were discharged. It also prevents creditors from making any attempts to collect discharged debts. However, liens are not discharged. It is only the personal obligation to pay that is discharged.
WARNING
What may seem as good bankruptcy planning by one may be called bankruptcy fraud by another. If you are considering arranging your affairs before filing a bankruptcy petition, consult with a lawyer that deals with bankruptcy issues on a regular basis. Mistakes can be costly and may exceed the fees charged by lawyers.
THE LAWYER
A lawyer, admitted to practice in the Bankruptcy Court where you file, can represent you in court and at the meeting of the creditors. A non-lawyer bankruptcy petition preparer can not represent you. Further, neither the Judge nor the Trustee assigned to your case is your lawyer and neither will provide legal advice. But a properly admitted attorney can provide advice and guidance.