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Bankrutpcy F.A.Q.

Who can file bankruptcy?

What is a Chapter 7 bankruptcy?

What is a Chapter 13 bankruptcy?

Can married people file bankruptcy jointly?

When should I file for bankruptcy?

Will all of my debts be forgiven if I file bankruptcy?

What should I know about the bankruptcy hearing?

Do have to take a credit counseling course before I file bankruptcy?

How much do attorneys charge for bankruptcy?





Q: Who can file bankruptcy?

Any person residing, domiciled, or having property or a place of business in the United States may file Chapter 7.  A business may also file a Chapter 7.  The new bankruptcy law includes a "means test" which applies an income vs. expense test in order to file Chapter 7 bankruptcy. There are currently no minimum or maximum income limits or other income requirements or limitations for people whose unsecured debts are primarily non-consumer debts such as investment liability, business losses, taxes, or student loans.


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Q: What is a Chapter 7 bankruptcy?

Chapter 7 bankruptcy is the most common type of bankruptcy and is often referred to as a "liquidation bankruptcy."  In Chapter 7, all of the debtor's assets, other than those types of assets specifically exempt from liquidation by statute, are turned over to a bankruptcy trustee for sale.  Sale proceeds, if any, are distributed among the creditors.  Most Florida Chapter 7 debtors have little non-exempt personal property because of Florida's liberal exemption laws.  Chapter 7 bankruptcy is used to eliminate, or discharge, primarily unsecured debts such as credit cards or medical bills.  Chapter 7 does not eliminate secured debts, such as vehicles (unless the secured item is surrendered).  Chapter 7 will not save a house from foreclosure nor a car from repossession if you are delinquent in payments.  Under the new bankruptcy law, only people who pass the "means test" may file a Chapter 7 bankruptcy. People who fail the means test have to file Chapter 13 bankruptcy. The means test is a complicated mathematical formula. Our office runs a means test using bankruptcy software after collecting the necessary information from you.


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Q: What is a Chapter 13 bankruptcy?

Chapter 13 bankruptcy results in a plan to repay all or part of your debt, but it is not designed to discharge or eliminate most debts.  Chapter 13 is used most often to save a house from a foreclosure sale.  Chapter 13 is also useful to eliminate some IRS debt and to establish an affordable plan to pay IRS debt that cannot be eliminated.  Chapter 13 bankruptcy is available to debtors with regular income.  A business cannot file Chapter 13.  In addition, there are upper limits on the amount of the individual's secured and unsecured debts in Chapter 13 cases. 


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Q: Can married people file bankruptcy jointly?

Married debtors can file a joint bankruptcy petition for a single filing fee, and most attorneys charge the same legal fee for joint cases as they do for individual cases.  Married couples who are jointly liable on most debts should file a joint bankruptcy.  On the other hand, if only one spouse is liable on most of the debts, the indebted spouse may file an individual bankruptcy, and in most cases, the individual debtor's bankruptcy will have no adverse effect on the non-filing spouse.


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Q: When should I file for bankruptcy?

The decision to file for bankruptcy is often one of the hardest choices that a person has to make in his or her lifetime. Poor planning can often make the process even harder. It goes without saying that filing for bankruptcy should be a last resort, and should only be done when all other methods of satisfying one's financial obligations have been exhausted. However, if your situation has become so severe that you are in danger of foreclosure, garnished wages or repossessions or are facing debts that you are in no position to pay, putting off the inevitable can have devastating consequences. Procrastination can cost you your car, your wages, and even your home. Filing your case in a timely fashion can spare you these losses.


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Q: Will all of my debts be forgiven if I file bankruptcy?

Many people mistakenly believe that filing bankruptcy will “wipe the slate clean" and absolve them of all their financial obligations, but that is not necessarily true all of the time. Even if you file for bankruptcy, you will still need to pay your child support, back taxes, federal student loans or debts incurred as a result of fraud or theft (writing bad checks, for example).  At the initial client consultation, we can discuss which debts are dischargeable and which debts are not.


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Q: What should I know about the bankruptcy hearing?

Not being prepared for the hearing, failing to show up or properly prepare for your hearing will not buy you more time. If you are not present at the time of your hearing, your case could be dismissed, and you will have to re-file at a future date. In addition, you will also be forced to pay court costs. Not having all of the required forms and documents may result in not getting all of your debts included in the bankruptcy, which means that you will still be responsible for them even after you file. It is very important to arrive for the hearing on time and that you bring all of your supporting documentation, including a detailed list of all of your creditors. You will also need to bring a valid photo ID and social security card to the hearing.


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Q: Do have to take a credit counseling course before I file bankruptcy?

The new bankruptcy law requires all debtors to fulfill two education requirements: a credit counseling course prior to filing and a financial management course before obtaining a discharge.  Failure to complete either of these courses and file the appropriate certificates with the court will prevent a successful bankruptcy. The Chapter 13 Trustee will offer the required courses to Chapter 13 debtors, but Chapter 7 debtors are required to take the courses on their own.  All bankruptcy education courses are available in person, by phone, or over the internet and are approved for the district in which you are filing.  You may get additional information about the costs and availability of debtor education at one or more of the following agencies approved for the Middle District of Florida:  In Charge Education Foundation, Inc.; Consumer Credit Counseling Service of San Francisco; GreenPath Debt Solutions; In Person and Internet Institute for Financial Literacy; Telephonic Money Management International, Inc.; Novadebt.


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Q: How much do attorneys charge for bankruptcy?

 

In the past, most consumer bankruptcies were relatively simple and legal fees were low.  The new bankruptcy law increases the amount and complexity of legal work required to prepare a bankruptcy petition and successfully complete a filing, and as a result, legal fees are higher than they used to be.  Also, the amount of work and fees will vary according to the debtor's income level.  As a general guideline, a debtor below Florida's median income should not have to pay more than $1,500 in legal fees for a simple Chapter 7 bankruptcy.  The court charges a $299 filing fee, and there may be other costs for financial education required by the bankruptcy law.  A debtor with income above Florida's median income will usually have to pay $300 to $500 more as additional paperwork is required. It is possible, but difficult, to file bankruptcy without the help of an experienced bankruptcy attorney.
Chapter 13 cases are more complicated, and legal fees are higher.  The judges generally expect and approve legal fees of approximately $3,500 (in addition to the filing fee) to file and complete a standard Chapter 13 case.  If your Chapter 13 case involves a wholly-owned business, or other complicated legal issues, legal fees will be higher.  The good news is that most attorneys require a down payment of approximately $1,500 to $2,500 (plus the filing fee) to prepare and file a Chapter 13 case.  The balance is paid through the Chapter 13 plan over a period of several months.


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The Law Office of Juan J. Piles assists clients with Bankruptcy, Residential Real Estate, Foreclosure Defense and Divorce & Matrimonial Law in Cape Coral, Florida as well as Fort Myers, North Fort Myers, Lehigh Acres, Bonita Springs, Naples, Miami, and Fort Lauderdale in Lee County, Collier County, Miami-Dade County and Broward County.



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