Bankruptcy 411

Take back control through bankruptcy education and action.

When financial troubles outgrow your ability to deal with them, life spirals out of control rather fast. When this happens, you need someone on your side with experience to help you navigate to safe waters. Please use our easy resources on Bankruptcy to familiarize yourself with the basics, then contact us to schedule your free in-office consultation.

Self-Help Bankruptcy Videos from Us Courts:

 

Bankruptcy Terminology.

Law Talk Bankruptcy Estate: the virtual but legal entity created when a bankruptcy is filed.
Law Talk Exemptions: the dollar value of property that you get to automatically keep (exempt) from the bankruptcy estate.
Law Talk Discharge: the elimination of personal liability (responsibility) for paying a debt. Note: not all debts are dischargeable!
Law Talk Bankruptcy Automatic Stay: the Court imposed prohibition of any continued or new debt collection actions outside of the bankruptcy estate. Creditors and collectors must gain permission from the Court to begin or continue any collection action once a case is filed, and post-filing collection activities are pre-defined, specific and limited.
Law Talk Chapter 13 Plan: the financial repayment plan or reorganizational plan to catch up arrearages and/or to pay off some or all debt.
Bankruptcy Petition: the legal documents and forms that report your particular financial picture to the Court and the appointed Trustee.
Law Talk Trustee: (in Florida) a contracted attorney who is appointed to administer the bankruptcy estate. Basically, a trustee is a court appointed debt collector.
Law Talk Secured Debt: debt that is secured (tied to with a lien) by real or personal property. Typical examples are mortgage, vehicle, boat, motorcycle loans and some financial accounts. Basically, if a creditor can legally take it from you if you default (stop making payments) then it is secured.
Law Talk Unsecured Debt: debt not under lien or secured. Examples are credit card debt, medical bills, or other deficiencies such as judgements or garnishments. IRS debt is usually unsecured but unfortunately not dischargeable.
Law Talk Equity: Generally speaking, it is the difference between what your secured property is worth (fair market value) and balanced owed on it. For example if your car is worth $7,000 and you owe $5,000 on it then you have $2,000 in equity. If you owe more than the property’s worth then you have no equity– you are upside down.
Law Talk Means Test: the financial criteria that determines what chapter of bankruptcy a person is eligible to file. In Florida, your income must be at or below the median for a family of your size in order to file a Chapter 7.

Explaining, Debunking, and Answering.

Law Talk Only certain people in specific situations can file bankruptcy. - False. Almost anyone can file a Chapter 13 and those passing the means test can file a Chapter 7. The question is not “can I file” but “should I file?” At Mike Reiter & Associates we will evaluate your unique situation and help you determine if bankruptcy is right for you.

Law Talk If I file I will lose everything. - False. Florida has very specific exemptions (remember that’s the value of the property you get to keep– see Bankruptcy 411-terms) and some assets like IRS qualified retirement plans for example are 100% exempt. If you owe on property like a home or a car, then you get to keep anything you can afford to keep paying for through Reaffirmation. If you can’t afford your secured property anymore, then you should Surrender it through the bankruptcy back to the lender who will not be able to pursue you for a deficiency. If you don’t have a lot of equity in anything and your furniture wasn’t handmade and imported from Italy or something, then you’ll be fine. And even if you are over your exemptions and you can’t bear to part with the Beanie Baby collection (or surrender other property for the trustee to sell), the trustee will likely allow you to “buy it back” from the estate over time (up to a year) at no interest. Trustees are merely court sanctioned debt collectors. If there’s anything to collect they get a percentage of the amount they collect as their fee so they will be happy to receive your money without the hassle and expense of an auction.

Law Talk Someone will come and appraise my property for the court. – It’s possible. But unlikely unless there is a suspicion that you are hiding assets or you have seriously undervalued your property. We use the “smell” test; does it smell right or ripe? If your income has been under $5o,ooo a year and you’ve got dependents, it is doubtful you own much of real value unless you inherited it, someone gave it to you, or you take extraordinarily good care of your stuff. Mike Reiter & Associates will aid you valuing your property. If you’re really worried you can hire your own personal property appraiser.

Law Talk I must list everything I own (assets) and everything I owe (liabilities) in the bankruptcy petition. - True. Well, maybe not the junk drawer or the 10 yr. old broken PC, but everything else of value no matter how it was acquired or who else may be paying for it. It doesn’t matter that the old pick-up truck was a gift; if you are on the title or deed or would report property if stolen then you own it. Don’t worry, our questionnaire is comprehensive and designed to help you comply with all the reporting requirements on the petition. We’ll take care of you!

Law Talk My neighbor said he transferred his non-exempt property to his brother until the bankruptcy was over and his lawyer said it was legal. - Lies! Your neighbor committed bankruptcy fraud by hiding assets and his attorney told him no such thing or he planed on joining the neighbor in federal prison. The Feds can throw the brother in too! At the 341 Meeting of Creditors you will be put under oath and your responses recorded, which can then be used as evidence against you if you lie and the authorities find out. Lots of trustees do public asset searches and they will find fraudulent transfers. Here’s the rule at Mike Reiter & Associates: if you’re going to lie to someone then lie to your spouse, mother, preacher or anyone else but don’t lie to us. We can only protect you with the truth.

Law Talk Bankruptcy is only available once in a lifetime - False. Because financial emergencies such as divorce, job loss or extended illness could happen more than once in your life, the law allows you to receive a discharge from a Chapter 7 bankruptcy once every eight years, and a person can often file for Chapter 13 several times if necessary depending on that person’s individual situation. Maybe though, serial filers should consider examining why they keep going down the same path expecting different scenery.

Law Talk A debt collector called and said I could go to jail if I don’t pay the debt regardless of bankruptcy. Lie! We hope you wrote that down because you have a GREAT Debt Collection Violation case and might not need a bankruptcy after all. But seriously, the myth that you can be imprisoned for owing consumer debt is so pervasive and persistent that we can’t help wondering where all the debtor prisons are? Who do you know that’s in prison because he defaulted on a Sears card? Stop believing anything a creditor or debt collector tells you regarding default! Also, creditors can’t eat you either so why are you panicking?

Law Talk If I list the debt I owe to the orthodontist she’ll stop tightening my kid’s braces. We doubt it. You must list the dentist and besides, just because she’s listed doesn’t mean you can’t keep paying her. The bankruptcy means she can’t bill you for pre-filing unsecured debt. Go to your medical providers, explain your situation, and keep paying them on schedule if that’s the only way they will continue non-emergency treatment.
I’ll have to close my bank accounts and I won’t be able to use my credit cards that have zero balances? Both false and true. False that you will have to close your bank accounts but true that the creditor will likely revoke the credit card, even if you cost it no money in the bankruptcy. In nearly every case, you will still have access to your debit card but it really is up to the bank or credit union. Bankruptcy can not force creditors to do future business with you.

Law Talk I’ll never be able to get another credit card or loan? – False. Bankruptcy is about your past credit and new credit is about your current income, payment history on secured debt and other factors. Most gainfully employed filers are surprised at how quickly they can recover. It’s not that you won’t be able to get credit, but that your credit will be very expensive for awhile. Be sure to read about rebuilding your credit and managing your financial life at www.ftc.gov (the Federal Trade Commission) so you don’t end up going down the same path as before.

Law Talk If I’m married my spouse must also file bankruptcy if I do. – False. You may file alone or you may even file separate petitions. However, separate petitions are a pretty expensive route unless you’re divorcing contentiously or separated by great and unmanageable distance. Mike Reiter, Attorney at Law, has filed many divorcing couples together since they discover it’s much cheaper and convenient.

Law Talk There are some debts that can’t be discharged. – True. What can be discharged varies in each chapter but generally debts incurred by fraud, intentionally harmful actions, dishonesty, priority taxes, unfiled taxes, family support obligations, student loans, criminal fines, some intentional torts, and criminal restitution can not be discharged.

Law Talk Creditors and debt collectors have to stop contacting me and lawsuits and garnishments will stop. – True. Once your case is filed, creditors are no longer entitled to garnish your wages for previous debts, and all civil lawsuits will stop (with some very limited exception). Creditors and collectors may not contact you after filing unless they’re granted expressed permission from the court or the bankruptcy was dismissed without discharge.

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