If you have plans to file a Chapter 7 or Chapter 13 bankruptcy in the near future, or have already begun the process, you have to begin planning carefully to ensure that the bankruptcy is granted and you’re your financial future will begin on more solid footing once the discharge is complete.  Therefore, there are certain mistakes you should avoid in order to ensure you don’t end up in hot water with the bankruptcy trustee or even have your case dismissed. 

#5 – Stop all use of credit cards

When you know you plan to file bankruptcy and continue to use credit cards (with the intention to avoid paying), that debt could become non-dischargeable.  This is especially true if you purchase items that aren’t necessities or luxury items, such as vacations. 

#4—Don’t transfer property

A bankruptcy trustee might ask for details concerning any property transfers made within the past 6 years, particularly focusing on any made within 1 year before filing bankruptcy.  If the trustee finds that the property transfer violates rules relating to the bankruptcy code, that transfer might be voided and the recipient of the property might be forced to return the property to the trustee. 

#3—Avoid repaying money you’ve borrowed from friends and family

Due to bankruptcy code, any transaction in which you’ve repaid money that was loaned to you by friends or family could be recovered from the people to which you’ve paid the money. 

#2—Avoid paying more than $600 to one creditor

In the same sense that money paid to friends and family can be recovered, payments exceeding $600 to any one creditor can also be recovered by the trustee. 

#1—Avoid cashing out on your 401k or retirement plan

Your retirement plan or 401k is protected by the bankruptcy code and if you’ve withdrawn any money from such plans or cashed them in, your trustee will likely void those transactions as preferences. 

Many people have questions regarding how their debts will be handled after filing for bankruptcy and the answer depends on the type of debt that is owed.  Most debt falls under the following categories:  secured debt, general unsecured debts and priority debts.  Each will be handled slightly differently in your bankruptcy. 

Secured Debts

A secured debt is a debt that is secured by collateral.  These types of debts include car loans, mortgages or any other debt when there is property that can be repossessed or taken if the debt isn’t paid.  In most cases, if you want to keep a secured debt, you can do so while still wiping out your other debt. Converselly, if you are ready to walk away from your house or car, you can do that as well.When a secured debt is handled in bankruptcy, the trustee will consider the debt’s collateral versus how much is owed.  Also, some debts can be partially secured and partially unsecured, such as when you owe more on a home or vehicle than it is worth. 

General Unsecured Debts

Any debt that is not secured by collateral is known as an unsecured debt.  Most credit cards, personal loans, payday loans and medical bills fall into this category. 

Priority Debts

Priority debts are debts that receive priority because the law treats them as being more important than unsecured debts.  These debts usually include child and spousal support; the administrative costs of the bankruptcy case, including trustee fees and attorney fees; wages and other forms of compensation owed to employees if it is a business filing for bankruptcy; certain income taxes, and some other kinds of taxes.

How Each Category Of Debt Is Handled In A Bankruptcy

In a Chapter 7 bankruptcy, if assets are liquidated, the debts that are considered high priority are paid first; in many cases, the unsecured debts aren’t paid at all, or are only paid partially. 

In a Chapter 13 bankruptcy, the repayment plan created by your trustee will have all priority debts paid before the case is completed. 

No one ever really wants to file bankruptcy.  After all, admitting to financial distress and that you have lost control of your finances is not an easy task, especially for someone who has a great sense of pride and independence.  Filing bankruptcy is admitting that you need help and for many people, that initial step is the most difficult one to make. 

However, when is it absolutely, without a doubt time to consider bankruptcy?  Here are some good leading questions to help you determine if bankruptcy is the right option for you.

1. Is the financial stress you’re under affecting the rest of your life and personal relationships? For our married clients, not only do their finances improve post bankruptcy, so does their marriage.  After all, what do you always fight about- MONEY! And your finances will be in better shape post bankruptcy.
2. Are you depressed, anxious, or otherwise physically stressed due to being unable to make your monthly payments on time or due to collectors calling? 
3. Is your home in foreclosure?  If so, did you know that you can delay the process, allowing yourself more time to catch up on payments, perhaps even eliminate a second mortgage, if you file for bankruptcy? 
4. Are you currently having your wages garnished?  If so, and if you are barely able to make your monthly payments, such garnishment can wreak havoc on your financial stability and budgeting.  Filing bankruptcy can stop the garnishment and possibly discharge the debt, depending on what type of debt it is (taxes, child support and many student loans cannot be discharged). 
5. Are you able to save any money at all?  If you answered no to this, then bankruptcy might be your best option to get back on your feet financially.  If all of your monthly income is going toward necessary expenses and bills, you will never be able to save for a rainy day and get yourself in a better financial position.  This ability to save is a crucial step to getting on the right track financially. 

We are proud to announce our new Fort Lauderdale  office to better serve our Broward and Palm Beach clients:

6750 N. Andrews Avenue, Suite 200, Fort Lauderdale, Florida, 33309. Although it is in Fort Lauderdale, most people know that area as ‘Cypress Creek” and you can see it right off i-95 exit 33B.  With three different offices and appointments available from 9-7:30 Mon-Fri and 9-1 on Saturdays, there is no reason you can’t see us for your free initial consultation and find out how we can help you get the fresh start you need!  Call us now  305-663-3281!

Many people have questions regarding how their debts will be handled after filing for bankruptcy and the answer depends on the type of debt that is owed.  Most debt falls under the following categories:  secured debt, general unsecured debts and priority debts.  Each will be handled slightly differently in your bankruptcy. 

Secured Debts

A secured debt is a debt that is secured by collateral.  These types of debts include car loans, mortgages or any other debt when there is property that can be repossessed or taken if the debt isn’t paid.  In most cases, if you want to keep a secured debt, you can do so while still wiping out your other debt. Converselly, if you are ready to walk away from your house or car, you can do that as well.When a secured debt is handled in bankruptcy, the trustee will consider the debt’s collateral versus how much is owed.  Also, some debts can be partially secured and partially unsecured, such as when you owe more on a home or vehicle than it is worth. 

General Unsecured Debts

Any debt that is not secured by collateral is known as an unsecured debt.  Most credit cards, personal loans, payday loans and medical bills fall into this category. 

Priority Debts

Priority debts are debts that receive priority because the law treats them as being more important than unsecured debts.  These debts usually include child and spousal support; the administrative costs of the bankruptcy case, including trustee fees and attorney fees; wages and other forms of compensation owed to employees if it is a business filing for bankruptcy; certain income taxes, and some other kinds of taxes.

How Each Category Of Debt Is Handled In A Bankruptcy

In a Chapter 7 bankruptcy, if assets are liquidated, the debts that are considered high priority are paid first; in many cases, the unsecured debts aren’t paid at all, or are only paid partially. 

In a Chapter 13 bankruptcy, the repayment plan created by your trustee will have all priority debts paid before the case is completed. 

This is because whatever facts you are attempting to conceal about your finances are likely already known by the bankruptcy trustee or the attorney that has been hired by your creditors.  If the “other side” knows more about your true financial situation than your own attorney does, you are setting up a scenario in which your attorney is going into the fight blind.  In this situation, he or she cannot fight for you without the proper knowledge to do so. 

Your bankruptcy attorney has a fine line to walk.  He or she must keep the bankruptcy trustee happy and present your bankruptcy case to the court without appearing to hide something.  If there is information that the trustee knows but your bankruptcy attorney doesn’t, this will look suspicious to the court and keep your attorney from doing the job he or she is trying to do—the job of helping you and your finances. 

So should you always be completely honest with your bankruptcy attorney about your financial situation?  The answer is a resounding yes!  You are paying an attorney to help you get your finances back on track, so you should take advantage of the opportunity to let your attorney know everything that is related to your financial state of affairs.  Then, and only then, will the attorney be able to help you in the best way possible.  In our experience, people get a lot of bad advice about bankruptcy- from their friends, the internet, their “primos en Kendall” and lots of other places.  The best advice regarding bankruptcy you can get is from a bankruptcy attorney.  Most good ones offer a free initial consultation (like us), so give them a call (our number is 305-663-3281) and tell them EVERYTHING.

Garnished wages are something no one wants to deal with, especially when a too-tight budget makes living paycheck to paycheck a common occurrence.  However, if you find yourself in this situation, it is important to know that filing bankruptcy stops all garnishments except domestic support obligations such as child support and alimony..

When a banruptcy is filed, an automatic stay is created. An automatic stay is a term that is used in bankruptcy to denote an automatic stop to all garnishments and collection efforts when the bankruptcy is filed.  A creditor can petition the court to allow them to resume collection efforts after an automatic stay has been placed, but must have a valid reason for submitting this request.  In most cases, the court will not allow collection efforts to resume.  Exceptions to this, however, are domestic support obligations such as child support and alimony.

The automatic stay is officially over when the bankruptcy is discharged or dismissed.  In a discharge, the creditor to whom you owed the money will likely be included in the discharge, so the garnishment will not continue. 

If your wages were garnished prior to filing bankruptcy, there are ways that you and ensure the garnishment stops as quickly as possible.  First, you should give a written notice of the bankruptcy filing to the payroll department of the company for which you work.  If the wage garnishment was handled by the local sheriff’s office, you should notify that office, as well. 

In some cases, you might qualify for a return of the garnished wages.  To qualify for this, the garnished wages must have been over $600 and you must have had enough exemptions applied in your bankruptcy to cover the amount.  This must occur within 90 days of your bankruptcy filing.  As tough as your current situation may be, imagine if you suddenly received 25% less!  That’s what a garnishment can do and the most effective way to stop it is to file a bankruptcy

Anyone who is considering bankruptcy will likely be concerned about its effect it will have on car loans, since such loans are considered secured loans, with the vehicle as collateral.  Florida has bankruptcy exemptions that allow most people to keep their vehicle but what if you aren't sure if you want to.  So how do you know what will happen to your car before you make the choice to file?

Regardless of whether you file Chapter 7 bankruptcy or Chapter 13 bankruptcy, there will be an “automatic stay” that applies and prevents debt collection attempts, lawsuits, foreclosures, wage garnishments and repossessions until the court determines the outcome of your bankruptcy filing.  How the courts will handle your car loan depends on the type of bankruptcy you file. 

If you file Chapter 7 bankruptcy, your car loan will be considered secured debt and you essentially have two options.  You can also reaffirm it, which means you will continue making payments as normal.  Same interest rate, same payments, same time. Or, you can surrender it, which means you give the car back and have the remainder of the amount owed on the car (after the car is sold through auction) discharged through the bankruptcy filing.  

If you file Chapter 13 bankruptcy and your car is a newer car (meaning you bought it within 910 days of the date in which you filed bankruptcy), you are required to pay the amount of the loan, although it might be possible to get your interest rate reduced.  If your car is an older car (meaning you purchased it more than 910 days before filing for bankruptcy), you will only be required to pay the car’s current market value.  This is a useful tool for people who had bad credit and consequently have been paying for years at an obscene interest rate.