Will my credit be ruined for the rest of my life?
Hardly! While the filing of a Petition in Bankruptcy will remain on your credit rating for ten years (as opposed to simple bad credit which will only remain for seven years), judgments resulting from lawsuits filed against you can remain in place for a maximum time of 20 years. Based upon my experience of representing over 3000 bankruptcy clients, many clients are able to obtain unsecured credit cards after one year, finance a new motor vehicle or purchase a home right after discharge.
Please understand that credit approval can depend upon a number of factors. For example, if you are able to continue making your mortgage payments and keep your home through the filing of a bankruptcy, then your credit will improve more rapidly than someone who does not own any property. In short, while the filing of a Petition in Bankruptcy can be detrimental to your credit history, it can ultimately lead to a better credit rating than having judgments obtained against you, having your wages garnished and having your bank accounts taken.
Can my wages be garnished?
If you do not file bankruptcy and a judgment is obtained against you, your wages may be garnished. This can only be accomplished after you have been served with a lawsuit and a judge has ruled against you after trial or based upon your failure to defend your case. If you do file bankruptcy, then your wages can never be garnished and judgments can never be obtained against you so long as all of your debts were listed on your bankruptcy petition.
When is the best time to file bankruptcy?
The best time to file bankruptcy is when you have no other choice. Simply owing money is not a reason to file bankruptcy. If you are having a temporary "cash flow" problem and feel that you can get back on your feet if given a short breathing spell, then you may wish to consult the Consumer Credit Counseling Service of the Palm Beaches, a United Way agency. This group will deal with those creditors that agree to deal with them by reducing your payments. Unfortunately, interest can still run and this may only postpone the inevitable. However, their services are relatively inexpensive since they are subsidized by the county and state and it may be worth a try. Once you decide, after due consideration, that the filing of a Petition in Bankruptcy is right, you should not procrastinate or postpone this decision.
How long do I have to live in Florida in order to file bankruptcy?
Generally, the minimum period of time is ninety days. However, under certain circumstances, this period of time may be shorter. In order to use the exemptions available to residents of the State of Florida you must have lived here for the last 730 days (approximately 2 years). In addition, in order to utilize the full Florida homestead exemption, you must have lived within Florida for the last 1215 days (approximately 3 years 4 months).
What hearings are required in court?
Generally, the only hearing that is required is a meeting of creditors where everybody to whom you owe money has the right to be present and ask you questions for approximately five minutes. This hearing does not take place in court. Instead, it takes place in the Trustee's meeting room. In the vast majority of the cases, no creditors show up since it is generally a waste of time for them to do so.
When your bankruptcy petition is filed with the court a trustee will be appointed. A trustee is simply a person, not a judge, whose task it is to inquire as to any assets that you may own.
Prior to the meeting of creditors, the trustee will have reviewed your tax returns for the last four years and possibly your canceled checks for the last twelve months in order to see if you have hidden any property. If you have nothing to hide, then this meeting should not cause you any concern.
I purchased furniture from Rooms To Go and instead of using my Visa card I used their “in store” credit card because they told me that I would have no interest payments for two years. If I stop making the payments what will happen to my furniture?
All of us get enticed into using the store’s “own” credit cards because we like the fact that no payments will be due for a period of time or that no interest will be charged. These are quite tempting. However, unlike MasterCard or Visa cards the finance company retains a lien on your purchase until it is paid in full. These finance companies may attempt to force you to re-obligate yourself on the original agreement in order to keep the furniture, may settle for a lesser cash sum in order for you to keep the furniture or, if you do neither of the aforementioned alternatives, these companies will have the right to file a lawsuit against you in state court in order to obtain possession of the furniture. Generally, we recommend that you do not re-sign or “reaffirm” a finance agreement and instead, we suggest that you retain possession of the furniture and see whether the finance company pursues an action against you in state court. Frankly, I have never seen finance companies do this since the only result would be that they could simply obtain possession of the furniture again. This would be a costly process for them to obtain your used furniture which will not yield very much money for them. They do much better if they simply pester you into making payments. Naturally, if you are represented by an attorney they will be unable to contact you after you file for bankruptcy. If I represent you, the “pestering” is not a real issue. Again, I generally suggest that you stop making payments to them and keep your furniture.
What if I should inherit money within six months of bankruptcy?
If you inherit money within six months after filing for bankruptcy, then this money may belong to the bankruptcy estate for the benefit of your creditors. If you feel that this is a possibility, then you should advise this office. We may advise you to be “written out” of a Will for the present time. Other than by inheritance, if you acquire money through virtually any source the day after your petition is filed, this money should be yours to keep.
Will my federal income taxes be discharged in bankruptcy?
Federal taxes are generally not dischargeable. However, if your 1040 income tax return was filed on a timely basis and was otherwise not fraudulently filed, then your income taxes may be discharged if they have become due and payable at least three years prior to the time that we file your petition in bankruptcy and if the taxes were assessed by the Internal Revenue Service for at least 240 days prior to the date of the filing. This is an extremely complex area of law and we can advise you better after your case is fully reviewed. If you had employees, then 941 taxes (tax withholding for employees) are never dischargeable nor is any sales tax discharged that is owed to the State of Florida. Penalties and fines may also be assessed. However, generally, if the tax itself is discharged, then the penalties and interest would also be discharged.
Are student loans dischargeable?
Student loans are not dischargeable unless they cause an undue hardship. "The Undue Hardship" standard is quite rigorous and is rarely met.
What debts cannot be discharged?
Alimony, child support, certain taxes as mentioned previously as well as debts based upon fraudulent acts are generally not dischargeable. Other debts may not be discharged as well, which could include debts arising from drunk driving offenses, credit card charges owed to a single company that exceed $500.00 for a luxury good or service used by you within 90 days before you file for bankruptcy, or taking out a cash advance in excess of $750.00 within seventy days before you file for bankruptcy relief. If, however, these charges or cash advances were for things reasonably necessary for your support then they would not present a problem with your discharge. If this is the case, then it may be advisable to wait a short period of time before you file for bankruptcy. Certainly, you should immediately cease using your credit cards for anything after today since those debts may not be discharged in bankruptcy.
What are fraudulent acts?
Debts obtained through fraud or deceit may not be discharged in bankruptcy. An example of an act which might not be dischargeable is securing a credit card or a mortgage by lying about your income. This is a complex area of law and these matters should be discussed with me.
When I file bankruptcy, how many of my personal assets will I be allowed to keep?
You can generally keep your homestead, whether it is a mobile home, a condominium, or single- family home, as long as you pay any mortgages that are outstanding including first or second mortgages. The dollar amount of your homestead that you can keep is unlimited. However, the acreage may vary. You may keep up to 160 acres of your homestead if you reside outside of the city limits; however, if you are within the city limits, then you would be limited to ½ acre. If you have not lived in Florida for the last 1215 days then your equity would be limited to $125,000.00 of value per person filing for bankruptcy. In addition, each person filing would be able to keep $1,000.00 of personal property.
How is this amount of $1,000.00 of personal property calculated?
Generally, you assign a fair market value to all of your property. Please bear in mind that fair market value is generally not the price that you paid for an item since, as soon as you purchase something, it rapidly depreciates. Clothing almost always has no value and most household items have an extremely limited value. We will review your values with you. However, since we will not inspect your assets, you alone would be responsible for arriving at the values.
What about my vehicles?
You may exempt and therefore keep one motor vehicle per individual filing for bankruptcy valued at up to $1000.00 per vehicle. Many people have leased their vehicles and leased vehicles would be exempt. In addition, if you owe more on your vehicle than what it would bring at sale or if you have no more than $1,000.00 of value in your vehicle over and above what is owed on the vehicle loan, then you could keep that vehicle. In addition, there are other ways for you to keep your vehicle and we can discuss these when we discuss your case.
Will the Trustee come to my home to inspect my property?
The Trustee may very well come to your home, however, the trustee would call and make an appointment. In addition, when the trustee arrives do not be concerned that his vehicle will have a sign on it that says “Bankruptcy Trustee’s Office”. This does not happen and the trustee is not interested in causing you any embarrassment or undue hardship. The trustee will not open closed boxes or go through your drawers. Instead, they will simply take photographs of the furniture and try to assess the value of your furniture. The trustee would basically consider what your property would bring at an auction or garage sale. These values are low and I very seldom have clients lose any personal property. Instead, if their property exceeds their $1,000.00 allowance, then we make arrangements to repay to the trustee the value of this property over a six month period.
What other items can I keep?
You should be able to keep Individual Retirement Accounts (IRAs). However, they are limited to $1,000,000.00 in value. In addition, you should be able to keep life insurance policies including cash surrender values, annuities and worker's compensation claims. You generally cannot keep any proceeds from personal injury claims or class actions suits which are pending before you file.
Is there life after bankruptcy?
There is life and, in fact, perhaps a far better life. Bill collectors will not plague you, your wages will not be garnished, and lawsuits cannot be filed against you. In most cases, no one will know that you filed bankruptcy. However this will be reported on your credit bureau report. The time that it takes to re-establish credit will vary. You will find that because you will no longer have many debts and cannot file bankruptcy again for eight years, you may very well be in a better position to borrow money than will many of your friends. In most cases, you will be able to refinance your home or purchase another after discharge for approximately one to two percentage points over the standard conventional rate. At the two year mark after your discharge you should be able to obtain the lowest conventional mortgage rate available to anyone. Indeed, most of our clients are flooded with applications for secured credit cards immediately after filing and they find, after use of secured credit cards with a prompt payment history, that these secured credit cards will be converted to traditional unsecured credit cards. Having said that, I do not advocate the use of credit cards if the charges are not paid in full every month. If you continue to run a balance, then unfortunately you may be back to file for bankruptcy protection.
Can I go to a credit repair agency and get the bankruptcy wiped from my record or improve my credit?
No. These companies are routinely investigated by state and federal authorities for misleading and fraudulent acts and, in fact, they can do nothing more than what you can do for yourself. You are allowed to write to the credit bureau and advise it as to why you had to file bankruptcy as well as any other factors that would induce a loan company to give you credit. This letter would be sent to any company running a credit check on you and they could consider it. Unfortunately, there is little else that you can do. Again, even though the fact that you filed bankruptcy within the last ten years would be indicated on your credit bureau report, this alone should not prevent you from obtaining credit again within several years after you have filed bankruptcy.