Here are some frequently asked questions (FAQs) related to bankruptcy that a Miami bankruptcy lawyer might address:
What are the different types of bankruptcy?
Answer: Bankruptcies are broadly classified into two types: liquidation and reorganization. Chapter 7 is liquidation and Chapter 13 reorganization. Chapter 11 (which includes Subchapter V) is a reorganization chapter, but the plan can be a liquidating plan. So, Chapter 11 can be either reorganization or liquidation. Each Chapter has its own eligibility requirements and processes.
How do I know if I qualify for bankruptcy?
Answer: Everyone is “qualified” to file a bankruptcy. The real question is whether you are eligible for relief under a particular Chapter. Eligibility depends on various factors, such as your income, your spouse’s income, the amount of debt you have and the type of debt you have (consumer debt or non-consumer debt). Consulting with an experienced Miami bankruptcy lawyer can help you determine your eligibility.
Will I lose all my possessions if I file for bankruptcy?
Answer: No! In all bankruptcies, your exempt assets are off-limits to creditors and you will be able to keep them. “Exemptions” allow you to protect certain assets from creditors, including the bankruptcy Trustee. Under a Chapter 13 or any other reorganization Chapter, all of your assets are protected to the extent you wish to keep them. If you have non-exempt assets, a reorganization Chapter such as Chapter 13 allows you to keep them in exchange for compensatory payments to your creditors. In Chapter 7, you are at risk of losing valuable non-exempt assets if you are not able to purchase them back from the Chapter 7 Trustee. But that is the basic bargain of a Chapter 7: you exchange your non-exempt assets for a discharge of your dischargeable debts. An experienced bankruptcy attorney can help you understand which of your assets are exempt and which are not.
How will bankruptcy affect my credit score?
Answer: If you have already defaulted on your credit card debts or you have already lost a car to repossession, bankruptcy is a first step you can take to actually improve your credit score. By eliminating your debt, you can embark on a fresh start because one of the factors that affects your credit score is the amount of debt you carry. By eliminating your debt, you have changed this component of your credit score in your favor. However, if you are up to date on all your payments and enjoy a credit score above approximately 550, then yes, immediately filing a bankruptcy will hurt your credit score. However, if you are up to date on all your payments now, but know you will not be able to make any more payments, it is the inability to make those payments that will hurt your credit score, not the filing of the bankruptcy. You should understand that there are known techniques to improving your credit score over time after filing bankruptcy.
Many clients report credit scores in the 700s within two years of receiving their bankruptcy discharges. Your Miami bankruptcy lawyer can provide guidance on steps to take to rebuild credit after bankruptcy.
Am I permitted to keep my home and car if I file for bankruptcy?
Answer: Yes! Bankruptcy is designed to save you from financial disaster. And in Miami, indeed, in all of Florida, except in the rare case where a person has sold non-exempt assets and used the money to acquire or improve their home, or pay down their home mortgage, 100% of the equity in your home is protected from creditors! Residents of almost all other states only have a limited homestead exemption. Florida is one of only six states that have an unlimited homestead exemption. Of course, you must remain current on your mortgage, your property taxes, and any homeowners or condominium association assessments, or those creditors can take away your home.
As for a car, most people are able to save their car even though they have filed for bankruptcy by simply continuing to make the payments. This is because most folks either lease their car or they have purchased their car, are still making payments, and have less than $1,000 in equity in their car. Equity is the extent to which the value of the car exceeds the balance owed to the bank. In the cases described above, the lack of significant equity means you get to keep your car by just making the payments. However, in cases where the equity exceeds $1,000 – $2,000 (for a homeowner) or $5,000 – $6,000 (for a non-homeowner), you will still be able to keep the car, but you may be required to compensate your creditors to the extent you have such non-exempt equity. Once again, an experienced Miami bankruptcy lawyer can help you understand your options for keeping your home and car in bankruptcy.
Will bankruptcy stop creditor harassment and lawsuits?
Answer: Yes, filing for bankruptcy triggers an automatic stay, which halts most collection actions, including creditor harassment, lawsuits, wage garnishments, and foreclosure proceedings.
How long does the bankruptcy process take?
Answer: The duration of the bankruptcy process varies depending on the type of bankruptcy and the specifics of your case. Chapter 7 typically takes a few months, while Chapter 13 can last three to five years.
What debts can be discharged in bankruptcy?
Answer: Most types of unsecured debts, such as credit card debt, medical bills, and personal loans, can be discharged in bankruptcy. However, certain debts, such as alimony, child support, other divorce debts (in Chapter 7), recent income taxes, and student loans are generally not dischargeable. Also, debts arising from fraud and other willful acts to hurt someone or their property can be held non-dischargeable if the creditor comes into bankruptcy court and files a lawsuit (an adversary proceeding) to prove the debt is excepted from discharge.
What documents do I need to file for bankruptcy?
Answer: A lot! Your bankruptcy trustee is legally obligated to thoroughly investigate your financial circumstances. This means they will need copies of almost all your documents that have a dollar sign ($) or a decimal point (.)! So, you will need to provide documents such as tax returns, pay stubs, bank statements, credit card statements, auto installments statements, mortgage statements, and more. Your attorney will provide a detailed list of all required documents.
How much does it cost to file for bankruptcy?
Answer: The filing fee for bankruptcy varies depending on the type of bankruptcy you’re filing. Additionally, attorney fees will vary based on factors such as the complexity of your case and the services provided. Many Miami bankruptcy lawyers offer payment plans or free initial consultations.
These FAQs provide a general overview of common questions individuals may have about bankruptcy. However, it’s important to consult with a qualified bankruptcy attorney for personalized guidance and advice tailored to your specific situation.