Frequently Asked Questions

  • Q:What is Bankruptcy?

    A:Bankruptcy is a legal process which allows a person (a "Debtor"), who owes more money than he or she can currently repay, to either (1) repay a portion of the money over time under Chapter 11, 12, or 13, or (2) have the entire debt forgiven ("discharged") under chapter 7.

  • Q:How Long Does It Take to File Bankruptcy?

    A:Bankruptcy may take several months or several years, depending on which chapter you file and whether anyone files an adversary proceeding (a separate lawsuit). Chapter 7 is typically the shortest and simplest form of bankruptcy (3-6 months), while Chapter 13 lasts for the duration of your repayment plan (3-5 years).

  • Q:What Chapter Is Right for Me?

    A:Your decision whether to file bankruptcy and under which chapter to file depends on your particular circumstances. In general, Chapter 7 is appropriate when the Debtor has insufficient income to pay a portion of his/her debts, and the Debtor is not seeking to keep non-exempt property. Otherwise, if the Debtor has an income or property and can afford to repay at least some of his/her debts, Chapter 11, 12 or 13 may be appropriate, depending on whether the Debtor is an individual, partnership, corporation, or family farmer. The decision whether to file a bankruptcy case and under which chapter is an extremely important decision and has tremendous financial impact. Consequently, this decision may require expert advice from a bankruptcy attorney.

  • Q:What Happens When You File Chapter 7?

    A:When you file Chapter 7, your nonexempt assets will become part of the bankruptcy estate. In other words, any property you cannot protect through state or federal exemption laws may be sold by the trustee to repay your creditors. This process is called liquidation. Once the trustee finishes the liquidation process, the court can discharge any remaining unsecured debt. Fortunately, most people who file Chapter 7 can complete the process without losing anything they own.

  • Q:What Is a Bankruptcy Discharge?

    A:If the court discharges your debt, you are no longer legally obligated to pay it. The individuals or entities you owed can no longer pursue it by any means. Every chapter of bankruptcy may result in a debt discharge, but it will not occur until the end of the case when you have completed all requisite steps.

  • Q:What Debt Does Bankruptcy Eliminate?

    A:Bankruptcy only discharges unsecured debt. The Bankruptcy Code also lists child support, alimony, fines, penalties, and other debts as non-dischargeable. Tax debt and student loans are technically dischargeable, but qualifying for this relief can be difficult.

  • Q:What Is the Difference Between Secured and Unsecured Debt?

    A:Secured debt is backed by collateral. In a mortgage, for example, the collateral is your home. Your lender has the contractual right to seize your home through foreclosure if you fall behind on payments. The same is true for automobile loans.

  • Q:Can Bankruptcy Stop Foreclosure?

    A:Yes. This is a great option for those who fear they may be losing their property. After filing for bankruptcy, the court orders an automatic stay, which prevents creditors from contacting you and puts the process of foreclosure on hold. However, creditors will eventually be able to move forward with the foreclosure, although the automatic stay can provide you with the time you need to catch up on payments or to renegotiate the terms of your mortgage. There are also other options, including a short sale for those looking to be freed from the debt of a mortgage.

  • Q:What Is an Automatic Stay?

    A:An automatic stay is the court order that takes effect as soon as you file your bankruptcy petition. It prevents creditors from initiating or continuing any form of debt collection, including calls, letters, lawsuits, foreclosure, repossession, and more. The automatic stay ends with the conclusion of your case.

  • Q:Will Bankruptcy Stop Garnishment?

    A:Yes. Any type of collection action will be frozen or canceled due to the automatic stay.

  • Q:What If a Lawsuit Is Filed Against Me for a Credit Card or Other Unsecured Debt?

    A:Most of the time bankruptcy will get rid of these debts, even if creditors have sued you, and perhaps even if a creditor has obtained a judgment against you. Under a recent change in Florida law though, it is much more important to file before any judgment or garnishment is entered, since it may not be possible to eliminate a garnishment on your wages, even through bankruptcy, if the garnishment is entered before the bankruptcy is filed. Also, if the judgment makes some ruling regarding fraud or wrongful conduct; or if you own non-homestead property on which a judgment lien may attach, the judgment may make it much more difficult or impossible to eliminate the debt in bankruptcy. However, having a suit or judgment should not prevent you from seeing a bankruptcy attorney to discuss your options. Keep in mind that the sooner you file for bankruptcy after a judgment, the better are your chances of eliminating the debt.

  • Q:Can I File for Bankruptcy If I Own a Business?

    A:Yes. If the business is incorporated, then the business is a separate entity, and it can file without you filing, or you can file without the business filing. Often, for instance if many corporate debts are personally guaranteed, both may be required to file. Generally, if the business is incorporated and wishes to keep operating, the business would need to file Chapter 11. If the business is not incorporated, then it is not a separate entity and only one bankruptcy filing would be permitted. If there are substantial assets or the business holds significant value, filing a bankruptcy under Chapter 13 would be the recommended course of action. This would typically allow a debtor to keep control of the business and keep operating the business even while the debts are reorganized in bankruptcy.

  • Q:What Happens When a Business Files Chapter 7?

    A:While Chapter 7 typically results in a debt discharge for consumers, business entities don’t experience the same benefit. Additionally, bankruptcy exemptions usually won’t be able to shield business assets from the liquidation process. Chapter 7, therefore, is usually used to dissolve business entities in a transparent manner. Sole proprietors, on the other hand, can receive a debt discharge of their personal and/or business debts because they are liable for both types.

  • Q:Will Bankruptcy Ruin My Credit?

    A:If you had a good score before filing, you can expect bankruptcy to have a negative impact. However, smart financial decisions can help you quickly rebuild your credit. Most see improvements within 1-2 years.

  • Q:What Should I Do Before the Initial Appointment?

    A:Before meeting with a bankruptcy attorney, you should prepare a list of creditors who you owe and include the amounts owed to each creditor. Have this list available at the time of the initial appointment.

  • Q:Will I Need to Sign Any Forms at the Initial Appointment?

    A:You will be asked to review and sign the Debt Relief Agency disclosure, the Debt Relief Agency contract, and the Information disclosure at the first appointment. Downloading and reviewing the documents before the appointment can speed up the meeting. These forms are all required by the new bankruptcy law currently in effect.

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