Learn About Bankruptcy Information Relevant to Residents of Daytona Beach, New Smyrna, Deland, Port Orange and Central Florida
The Process of Filing for Bankruptcy:
Bankruptcy is a method by which an individual or a business that is overwhelmed with debt can seek to be relieved of the debt. Alternatively, a debtor can seek reorganization. Most individual debtors or consumers who cannot pay their debts can file for bankruptcy, as can many companies, corporations, or businesses.
How do I decide if I should file for bankruptcy?
There is no one correct answer to the question. The decision of whether or not a debtor should seek the protection of the federal bankruptcy laws is highly personal and individualized. It is usually not a decision that is reached easily or quickly. Before filing for bankruptcy, a debtor needs to know that not all debts are dischargeable. Put another way, not every debt that is owed can be wiped out or eliminated. For example, child support payments cannot be discharged in bankruptcy.
Not surprisingly, there are advantages and disadvantages to filing for bankruptcy. Some of the advantages are that certain debtors can eliminate many of their debts and make a "fresh start" with their financial lives.
Where do I file for bankruptcy?
Bankruptcy law is federal, rather than state, law. Consequently, the United States Bankruptcy Courts have "jurisdiction" control and/or supervision of bankruptcy cases. There is at least one bankruptcy court located within each state. There are three bankruptcy courts in the Middle District of Florida.
Even though the bankruptcy courts are governed by federal laws and certain federal rules of procedure, each bankruptcy court also has its own set of local rules.
Which "Chapter" do I choose?
The Bankruptcy Code is a group of federal statutes or laws that debtors and bankruptcy courts must follow. There are several "Chapters" of the Bankruptcy Code; a debtor must file a bankruptcy petition pursuant to one of these Chapters. For example, a debtor -- either an individual or a business -- might select "Chapter 7" in order to "liquidate" or wipe out many of the debts. A Chapter 7 "straight" bankruptcy allows debtors to make a "fresh start." A Chapter 7 debtor will not have to repay many of his or her debts because the debts have been discharged.
An individual or consumer who seeks a "reorganization" of his or her debts can file for bankruptcy under Chapter 13. A Chapter 13 debtor will attempt to repay his or her debts. A business, company, or corporation that wishes to reorganize, rather than liquidate, can file for bankruptcy under Chapter 11. A family farmer might qualify for a Chapter 12 bankruptcy proceeding.
There is also a difference between consumer and non-consumer debt, in reference to the means test when filing for bankruptcy.
Do you have to “qualify” for a specific Chapter of bankruptcy?
Chapter 7 Eligibility and the “Means Test”
On October 17, 2005, Congress changed the Bankruptcy law limiting access to chapter 7 case filings. Individual debtors with primarily consumer debts who want to file a case under chapter 7 will have their finances examined to determine if they can afford to pay creditors. If they can, based on a set formula know as the “means test,” they will not be eligible to file a chapter 7.
If they want to file a bankruptcy, they will need to file a chapter 13. The “means test” is designed to force people who can afford to pay some of their creditors even if it is $100.00 per month rather than to discharge all their debts in a chapter 7.
The “means test” compares the debtor’s excess monthly income to the amount of unsecured debt to determine how much a debtor could repay to creditors if he were in a chapter 13. Because this calculation is hypothetical and does not necessarily reflect the debtor’s true financial condition, a debtor who appears to be able to repay the minimum portion of his debts but who, in reality, cannot, may be permitted to stay in a chapter 7 case. Unfortunately, the means test is more complicated than we can explain well here.
Chapter 13 Eligibility
There are two principal requirements for eligibility in a chapter 13 cases. First, the debtor must have regular income, although this need not be from a job—regular benefit payments or rental income would qualify. Second, the debtor must not have debts over a certain amount.
What documents or forms do I file when I want to start bankruptcy proceedings? What information do I need?
A debtor starts the bankruptcy proceedings by filing a "petition" in the appropriate bankruptcy court. A petition consists of the paperwork that is required to establish or open the bankruptcy case. The debtor must list all of his or her assets and debts in the petition. He or she must also provide other information, much of which might seem private or possibly embarrassing. The details of a debtor's financial situation are, however, crucial in a bankruptcy proceeding; thus, a bankruptcy court will need such information.
Depending on a bankruptcy court's requirements and the "Chapter" under which a bankruptcy is filed, a debtor will be required to file specific forms and provide certain documentation.
Do I need an attorney to file my bankruptcy petition?
No, you are not required to be represented by an attorney during bankruptcy proceedings. You may wish, however, to explore all your options before filing for bankruptcy without having first sought legal counsel. An attorney will be able to help you determine whether or not filing for bankruptcy is the wisest decision for you. An attorney will also know about any changes in the bankruptcy laws. As with most areas of law, bankruptcy law can -- and does -- change. For example, a lawyer would be able to advise a debtor of any recently enacted or passed laws that affect the debtor's ability to wipe out or liquidate most of his or her debts. An attorney should be able to help a debtor that is considering filing for bankruptcy become aware of any possible changes or "reform" in the bankruptcy law that might make it harder or easier for that debtor to wipe out his or her debts.