Bankruptcy FAQs

Bankruptcy can be a complex process that poses many obstacles as well as important options. The following frequently asked questions (FAQs) will help you begin to understand the challenges and choices but are NOT intended to be a substitute for legal advice.


Q. What Is Bankruptcy?
A. People who are having trouble paying their debts sometimes consider bankruptcy as a remedy for this situation. An individual debtor usually files bankruptcy to obtain a discharge, which will wipe out his or her debts so that they will not have to be paid. Creditors cannot try to collect discharged debts from the bankruptcy debtor or sue the debtor and obtain a valid judgment. With a few exceptions, the creditors have no claim on the debtor's future income or future assets.

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Q. Do I need an Attorney to represent me for the filing of a Bankruptcy?
A. You are not required to have an Attorney represent you for the filing of a Bankruptcy, but, given the complexity of the Federal Bankruptcy Code, its interaction with potential state law exemptions, and legal documents that may need to be executed in your case other than the petition itself, consulting with an Attorney is generally a very good idea.

In the most simple, straight-forward cases, it is possible for an individual to either represent him or herself. In some cases, paralegals or document preparation services may help you fill out documents without providing legal advice.

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Q. What types of Bankruptcy are available to me as an individual?
A. An individual consumer may file one of two types of bankruptcies, a Chapter 7 or a Chapter 13.

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Q. What is the difference between a Chapter 7 Bankruptcy and a Chapter 13 Bankruptcy?
A. A Chapter 7 Bankruptcy is called a "liquidation" whereas a Chapter 13 Bankruptcy is called a "reorganization." Each is generally discussed below.

In a Chapter 7 Liquidation, the debtor assembles all assets, sets aside exempt assets, and decides what to do with secured assets. If there are any non-exempt assets left, the Trustee seizes such assets, liquidates them, divides the proceeds of the sale, and distributes the proceeds, pro-rata, to the debtor's unsecured creditors, satisfying as much of the outstanding balances as possible. Any remaining debts owed are then discharged.

In a Chapter 13 Reorganization, the debtor generally keeps all assets that he or she wishes to while reorganizing his or her debts in a manner that reduces the principal amounts of the debt that is due, stops interest, late-payments and over-the-limit-charges on the remaining balances, and establishes a monthly payment that must be made to the Trustee to satisfy all debts through the court approved re-payment plan.

Details of both types of consumer bankruptcies briefly described above should be discussed in detail with an Attorney, specifically addressing the facts and circumstances of your individual case.

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Q. What types of debts are dischargeable in Bankruptcy?
A. Certain types of debts, such as child support, alimony, some federal income taxes, and all employer withholding taxes are not discharged in bankruptcy. Generally, federally guaranteed student loans cannot be discharged, unless the Debtor has experienced a severe, undue hardship preventing them from altogether using their education for any gainful purpose. The debtor's wrongful conduct may make some debts non-dischargeable in a liquidation bankruptcy, such as incurring credit card charges when the debtor had no intent or ability to repay, obtaining loans using false financial information, or debts for harm caused while driving under the influence of alcohol or drugs.

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Q. What is the difference between a secured creditor and an unsecured creditor?
A. Generally speaking, a Secured Creditor is a creditor that has not only your promise to pay, but has a lien in the property that you possess. An Unsecured Creditor only has your "naked" promise to pay - if you are unable to make payment, the unsecured creditor does not possess a lien and therefore does not have the ability to seek possession of any specific asset, without court assistance.

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Q. What types of debts are not dischargeable?
A. Priority debts are not dischargeable in a Bankruptcy. Specifically, debts such as child support, alimony, some federal income taxes, and all employer withholding taxes are not discharged in bankruptcy.

Generally speaking, student loans cannot be discharged in a bankruptcy.

The debtor's wrongful conduct may make some debts non-dischargeable in a Chapter 7 Liquidation, such as incurring credit card charges when the debtor had no intent or ability to repay, or obtaining loans using false financial information.

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Q. The balance on one or more of my accounts may be different now than originally reported to my Attorney, does that matter?
A. Not really. If there are large differences please let us know, but your creditors have an opportunity to file a Proof of Claim in which they will tell the court the exact figure and the amount of the claim. The claim will then work its way through the court system.

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Q. May I keep assets despite filing Bankruptcy?
A. Yes. The State of Florida has exemptions that are laws that protect certain assets and keep them out of the reach of your creditors despite the fact that you are filing Bankruptcy. Assets that are exempt in the State of Florida include, but are not limited to:

  • Homestead exemption
    • Home owned & lived in for longer than 3 1/3 years is exempt in an unlimited amount
    • Home owned & lived in for less than 3 1/3 years is exempt up to $125,000 per Debtor
  • Automobile exemption - $1,000
  • Personal Property exemption - $1,000
  • IRS Approved Retirement Instruments (i.e., 401(k); IRA, etc.) - unlimited $ amount
  • Life Insurance Policies - unlimited $ amount
  • Social Security Income / Disability - reasonable $ amount
  • Head of Household Wages

You may also keep secured assets, despite the fact that you are filing Bankruptcy, if you chose to re-affirm the debt that is secured by the asset. For example, if you own a home, you may keep the home provided that you continue to make your mortgage payments and arrange, through your lawyer, to re-affirm your obligation to the mortgage lender after the Bankruptcy has been filed.

Consult with your Attorney to cover in detail what assets may potentially be kept and what steps need to be taken to insure that you may keep the assets.

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Q. May I transfer / sell assets prior to filing Bankruptcy?
A. It depends. Generally speaking, transfers of assets prior to the filing of a Bankruptcy are heavily scrutinized by the court, and, in some circumstances, may be reversed.

If you are contemplating both the filing of a Bankruptcy and the sale or transfer of assets, it is best that your first contact an attorney and discuss whether such transactions are allowable. Otherwise, transferring assets may jeopardize your case and prevent the discharge of your debts.

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Q. May I keep certain credit cards out of the Bankruptcy?
A. It depends. Legally, you may not "keep out" certain credit cards from the filing of your Bankruptcy. The law requires that you list all of your creditors in your Voluntary Petition of Bankruptcy. You do, however, in some circumstances, have the option of re-affirming a debt if after speaking with your Attorney, it is determined that it would be in your best interest to do so.

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Q. Should I continue to pay my debts until my Bankruptcy case has started?
A. It depends. If you have a positive payment history with your unsecured creditors, it may be worthwhile for you to continue to pay minimum payments to your unsecured creditors right up until your Bankruptcy case commences.

If, however, you do not have a positive payment history with your unsecured creditors, then paying them will not preserve a good payment history, as it is already blemished. Instead, it will likely be more important to pay your attorney's fees so that your case may be filed as soon as possible and your debts discharged or reduced, as the case may be.

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Q. How does my Bankruptcy case commence?
A. Your Bankruptcy cases commences with the filing of your Voluntary Petition of Bankruptcy with the court. As your Attorney, we will prepare your petition based upon the fact that you provide to us within the workbook that was given to you at the end of your consultation.

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Q. When does the Section 341 Meeting take place?
A. The Section 341 Meeting takes place approximately 3 to 4 weeks after filing your Bankruptcy Petition with the court. You will receive notice of the Address, Date, Time and Room Number for your meeting directly from the Bankruptcy Court via the U.S. mail.

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Q. What should I bring to the Section 341 Meeting?
A. Some type of photo ID (i.e. a valid Driver's License) and a document verifying your Social Security Number (i.e., Social Security Card, pay stub or Health Insurance card, etc.)

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Q. Will my attorney be present with me at the Section 341 Meeting?
A. Yes. A LeavenLaw attorney will be present at your Section 341 Meeting. The attorney, however, is there only in a support capacity. It is you, the debtor, who is sworn in and will testify as to the accuracy of the facts represented in your petition.

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Q. Will I have to attend any other meetings?
A. If you are filing a Chapter 7 Bankruptcy, you will not typically need to attend another meeting or hearing before receiving your discharge order from the court.

If you are filing a Chapter 13 Bankruptcy, you will not typically need to attend another meeting. Your attorney, however, will attend your Plan Confirmation Hearing for you.

You will have to attend an additional meeting or hearing only if the Court determines that an additional adversary proceeding or a final evidentiary hearing is necessary to resolve unique issues in your case.

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Q. When will I receive my discharge from the Bankruptcy court?
A. You will receive your discharge from the U.S. Bankruptcy court approximately 2 to 3 months after attending your Section 341 Meeting.

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Q. Will I be able to establish new credit after filing Bankruptcy?
A. Yes. It is possible to re-establish your credit after filing a Bankruptcy. In fact, for many debtors, Bankruptcy is the first and most important step in re-establishing your credit.

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Q. What is the best way to establish and rebuild credit after filing Bankruptcy?
A. Bankruptcy is a blemish on your credit report. Its affect, however, may be mitigated by showing a positive payment history on credit accounts after filing the Bankruptcy. This may be done in one of two ways.

First, continue to make timely payments on secured assets, such as your home or your car. This will demonstrate your ability to make responsible payments to your creditors.

Second, apply for a secured credit card. After you have obtained the card, make purchases on the card up to the pre-set limit. After your purchases, re-deposit an amount of money equal to the amount of your purchases. After you have done this for a few months, you will have established a responsible payment pattern, and your credit card limit will likely be increased. Soon thereafter, provided you continue to show responsible use of the card, you will likely be give an unsecured card. Continue to use it responsibly and you are well on your way to re-establishing your credit.

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Q. How long will a Bankruptcy show up on my credit report?
A. Federal law permits creditors to report credit activity for up to seven years. Bankruptcies, however, are permitted to be reported for up to ten years.

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Q. What are the consequences of filing Bankruptcy?
A. While Bankruptcy is a blemish on your credit profile, many times, depending upon a client's particular facts and circumstances, the filing of a Bankruptcy may be the first, most important step toward rebuilding one's finances. In the end, if an individual has incurred enough debt and does not have enough disposable income to direct toward credit card payments, many times there are two choices: continue to be a slave to your creditors or address the problem head on a take the steps necessary to rebuilding your financial future: manage your debt through the filing of a bankruptcy.

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Q. Is there Life After Bankruptcy?
A. Yes. LeavenLaw has spent over two decades helping people first manage and discharge their debt and then rebuild their financial future. After your Bankruptcy has been filed and you have received your discharge, there are additional steps we may take to further assist you on your road to financial recovery. Specifically, we offer our L&N Credit Rehabilitation Program and our L&N Homebuyer's Assistance Program.

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