Bankruptcy Overview
2005 Bankruptcy Act: Credit Counseling
The 2005 Bankruptcy Act requires all individual debtors who file bankruptcy on or after October 17, 2005, to undergo credit counseling within six months before filing for bankruptcy relief and to complete a financial management instructional course after filing bankruptcy.
2005 Bankruptcy Act: Means Test
Under the 2005 Bankruptcy Act your income and expenses will be analyzed to determine if you qualify to file a Chapter 7 or if you must file Chapter 13. To apply the means test, the courts will look at your average income for the 6 months prior to filing and compare it to the median income in Florida. If the income is below the median, then you may choose Chapter 7. If your income exceeds the median, the remaining parts of the means test will be applied to determine if you can file Chapter 7 or if you must file Chapter 13.
You may be able to file a Chapter 7 bankruptcy if you are unable to pay at least $6,000 over the next five years ($100 per month) to your unsecured creditors after your expenses. However, if you can pay at least $10,000 over five years ($166.67 per month or more) your Chapter 7 will likely be denied.
If you could afford more than $6,000 but less than $10,000 over five years, then a mathematical calculation determines whether your Chapter 7 will likely be successful or not. If you could afford to pay 25% or more of your unsecured debt, then a Chapter 7 will likely be denied. If you can't afford to pay 25% of your unsecured debt, your Chapter 7 filing will likely be successful. Examples of unsecured debts would include medical and credit card bills. Note that you can still opt for Chapter 13 even if you qualify to file under Chapter 7.
Gathering Paperwork
To begin the bankruptcy process you must itemize your current income sources; major financial transactions for the last two years; monthly living expenses; debts (secured and unsecured); and property (all assets and possessions, not just real estate). You should also collect your tax returns for the last two years, deeds to any real estate you own, your car(s) titles, and the documents for any loans you may have. Please fill out Income & Expenses form.
Filing Bankruptcy
Once you have gathered this information, we can then determine which property we believe is exempt from seizure based on the Florida exemptions will need to file a two-page petition and several other forms at the appropriate district bankruptcy court. These forms known as schedules ask you to describe your current financial status and recent financial transactions (typically within the last two years). If your creditors or the judge feel or find out that you have not been entirely forthcoming in your bankruptcy filing, it could jeopardize the outcome of your petition.
Chapter 13 Requirements
If after consultation with our attorney, you decide to file a Chapter 13 bankruptcy, we must submit a repayment plan proposal. After reasonable monthly expenses have been paid, how much money will be left to put toward your outstanding bills, and how will this money be divvied up among the creditors you owe? Priority claims (such as taxes and back child support) must be paid in full; unsecured debts (like credit card debt and medical bills) are usually paid in part. Depending upon the judgments of those involved with your case, unsecured debts can be paid off for as little as 10 cents on the dollar.
In addition to the general requirements listed above, the repayment plan must pass three tests:
- It must be delivered in good faith.
- Unsecured creditors must be paid at least as much as if a Chapter 7 bankruptcy had been filed. Generally, this is the value of all the nonexempt property you own.
- All disposable income must be paid into the plan for at least three years (you may use up to five years in order to meet the second test that you pay at least as much as in a Chapter 7).
Once we have filed for Chapter 13, you must begin making your plan payments. We will arrange with the court for these payments to be withdrawn directly from your wages.
Automatic Stay
Once we file your paperwork with the bankruptcy court, an automatic stay immediately goes into effect. This provision prevents creditors from making direct contact with you or staking a claim on any of your property from the day of filing forward. This will stop any foreclosure proceedings. Upon filing Chapter 13, you must begin making your plan payments. These payments will be withdrawn directly from your wages.
Bankruptcy Trustee
Upon filing, the court will assume legal control of your debts and property not covered by your Florida exemptions. A trustee will be appointed to your case by the court. The job of the trustee is to see that your creditors are paid as much as possible. This person will thoroughly review your paperwork, particularly the assets you have in your possession and the exemptions you wish to claim, and can challenge any element of your case.
341 Meeting of Creditors
Approximately a month after filing, the trustee will call a first meeting of creditors, which the debtor must attend. This proceeding is also referred to as the § 341 meeting, named after the corresponding section of the bankruptcy code. Creditors rarely attend a Chapter 7 bankruptcy meeting; one or two creditors may attend a Chapter 13 meeting, especially if there is a question as to the legitimacy of some aspect of the plan. During this meeting, we will negotiate any objections between you and your creditors. If we cannot reach a compromise, a judge will intervene.
Chapter 13 Plan Confirmation
Once you file a Chapter 13 plan, you will need to attend a hearing before a bankruptcy judge who will either confirm or deny the repayment plan. If your plan is confirmed and you follow through as instructed, the balance (if any) on the dischargeable debts you owe will be eliminated at the end of your term.
Contact a Bankruptcy Attorney at Dominguez & Associates, P.A.
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