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Law bookAgainst common belief, filing bankruptcy can be a very easy process; especially if you are filing a Chapter 7 Bankruptcy. Knowing what to expect when filing bankruptcy as well as hiring an experienced bankruptcy attorney are the keys to making it as easy of a process as possible. The goal of this article is to inform you of what to expect when filing bankruptcy.

Regardless of whether you are planning to file a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy, the beginning of the process is very similar. If you choose to hire an attorney, which I strongly encourage you to do, the process begins with an initial consultation in which you and your attorney discuss your reasons for filing bankruptcy, your income and household size, as well as your assets. Depending on your goals, income and assets, you and your attorney will discuss the pros and cons of filing a Chapter 7 Bankruptcy verses a Chapter 13 Bankruptcy and together come up with a plan that is unique to your specific set of circumstances.

Once you have decided which type of bankruptcy you will be filing, the next step is to gather the documentation your attorney will need in order to prepare your bankruptcy petition. Your attorney will let you know what he or she will need, which differs depending on your specific set of circumstances. Once your attorney has all the documentation he or she will need for your petition, an appointment is set for you to meet with your attorney again in order to review your bankruptcy petition for completeness and accuracy. Once the petition has been reviewed and signed by you, your attorney will file it with the court and you are then automatically assigned a bankruptcy case number. Continue reading →

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To begin, it is important to point out that there are some very important differences between an individual bankruptcy and a corporation bankruptcy. When a corporation files a Chapter 7 Bankruptcy, the corporation WILL NOT receive a bankruptcy discharge. The bankruptcy discharge is what tells your creditors you are no longer liable for the debt you owed them. This means that the corporation will still be liable for all debts not paid off when the bankruptcy estate has been fully administered and closed. The other major difference to take note of is that corporations are not allowed any exemptions. This means a corporation cannot protect any of its property like an individual can. An individual is afforded very specific exemptions, or protections, for certain types of property or assets up to a specified dollar amount.

You are now probably wondering why a corporation would ever file for bankruptcy? Well, under certain circumstances, it may make a lot of sense for a corporation to become bankrupt. Continue reading →

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Protect_thumbSection 529 of the Internal Revenue Code allows parents to set up education savings accounts for their child’s future college expenses. In Florida, these educational savings accounts are most commonly known as Florida’s Prepaid College Fund or Florida’s 529 Savings Plan. These types of plans can only be established for a child, stepchild, grandchild or step-grandchild and set up in the name of the person establishing the account (for example the parent or grandparent of the child) and the funds belong to that person.

When filing bankruptcy, this means the person who established the prepaid college fund for must disclose the fund in their bankruptcy petition as an asset. I am sure you are now wondering whether or not you will loose the prepaid college fund if you have to file bankruptcy, since it must be disclosed. The answer is, it depends. There are Federal and Florida specific exemptions for these types of accounts. If the exemption applies, then the funds should be safe from your creditors and you will get to keep it if you find yourself in the dire position of having to file for bankruptcy.

In Florida, Florida Statute 222.2 defines Florida’s exemption of assets in qualified tuition programs as:
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Many people who are considering filing for bankruptcy have life insurance policies and do not want to loose them by filing bankruptcy. However, your life insurance policy may not actually be considered a part of your bankruptcy estate or, if it is considered a part of your bankruptcy estate, there might be an exemption that will allow you to protect it. Whether your life insurance policy will be considered a part of your bankruptcy estate first depends on what type of life insurance policy you have. The second big consideration is who the beneficiary is on your life insurance policy. There are two main types of life insurance polices, Term Life Insurance and Whole Life Insurance, which we will discuss in turn.

Term Life Insurance:

Term Life insurance is life insurance that does not have any cash value while you are alive. Instead, upon your death it will provide proceeds to your designated beneficiary. In other words, it does not mature until your death. Thus, Term Life Insurance is not considered a part of your bankruptcy estate, because there is no “cash value” for your bankruptcy trustee to administer and provide to your creditors.

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kia_rioOne major concern clients have when making the difficult decision of whether or not to file for bankruptcy is their primary means of transportation; in other words, their motor vehicle. In most cities in the United States, having a vehicle can make the difference between being able to get to work consistently and maintain employment or not. Having a reliable means of transportation can be your lifeline. Attorneys receive many questions such as, “Do I get to keep my vehicle if I file bankruptcy?” and, “Will I be able to purchase a new vehicle.” Unfortunately, the answer is always, “It depends.” But what does it depend on?

One of the main considerations taken into account when your Trustee decides whether or not you get to keep your vehicle is whether your vehicle has any equity in it. The next consideration is whether or not you have exempted that equity. In Florida, you are only allowed to exempt $1,000.00 of equity in a motor vehicle per debtor. However, there could be other ways to protect more equity. If you are leasing your vehicle or took out a car loan to purchase that vehicle, and you currently owe your lender the full value of the vehicle or owe more than the vehicle is worth, then you can most likely keep the vehicle simply by reaffirming the lease or loan. Continue reading →

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Inheritance and bankruptcy are two topics that are not commonly thought of at the same time, nor is inheritance even thought of as a consideration when deciding to file bankruptcy. The issue being that if you file for bankruptcy and receive an inheritance within 6 months of filing, you could loose your entire inheritance to your bankruptcy estate. In other words, your bankruptcy trustee will take your inheritance from you and use it to pay off your debts. The majority of most people who file for bankruptcy have not taken into account the possibility of receiving an inheritance, and as a result, are naturally devastated when they learn they do not get to keep their inheritance as they expected. To put it simply, if you believe you may receive an inheritance within the next 6 months, you may need to wait to file for bankruptcy.

But what if you cannot wait to file bankruptcy due to an imminent foreclosure sale date or garnishment? Can anything be done to save your inheritance? An even less thought about concept is the planning your parents, or any other person who may leave you an inheritance, can do. By simply establishing the right kind of estate plan, your parents, or anyone else for that matter, can protect your inheritance from being taken by a bankruptcy trustee. By having any person who may leave you an inheritance include something known as a “spendthrift provision” in their will or other estate planning documents, your inheritance should be able to be protected if you find yourself in the difficult position of having to file for bankruptcy.

What is a “spendthrift provision” you may ask yourself? It is a provision found in a will or trust document that allows a personal representative or the trustee of a trust to first look to see if a beneficiary is in the middle of a bankruptcy or if they are about to file for bankruptcy before giving the beneficiary their inheritance. Simply put, the personal representative or trustee can first look both ways before crossing the street to make sure it is safe to give the inheritance to the designated beneficiary. If it is not safe, then the personal representative or trustee can take the appropriate steps to ensure the inheritance will not be lost.

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For many, being able to make charitable donations and continue to tithe to their religious organization is something that is extremely important to them. When their debts become more than they can manage many people begin to think about filing bankruptcy, and whether or not they will be able to continue making their donations is a major concern. Another concern is whether or not the donations they have already made will be affected if they file bankruptcy. Congress understood and recognized this. In 2006, Congress added the Religious Liberty and Charitable Donation Clarification Act to The United States Bankruptcy Code, but what does this Act actually mean?

Chapter 7

When filing a Chapter 7 bankruptcy, the Religious Liberty and Charitable Donation Clarification Act allows charitable donations or tithing as long as there is an established history of the donations or tithing, and the amount is not extremely unreasonable in relation to your monthly gross income. Additionally, charitable donations and tithing may even help you qualify for a Chapter 7. In order to qualify for a Chapter 7 bankruptcy, you must first pass the means test. The means test makes sure you do not have enough income for a Chapter 13 Payment Plan instead. However, the means test does allow you to deduct certain monthly expenses from your gross income. Regular charitable donations and tithing is one deduction that is permitted and could even help you qualify to file a Chapter 7 bankruptcy.

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repoIf your vehicle has recently been repossessed, a Chapter 13 Bankruptcy might help you get your vehicle back! Chapter 13 Bankruptcy is a reorganization of your debts, which requires a monthly payment plan for up to 5 years. If you file bankruptcy soon enough after the repossession of your vehicle and the vehicle has not yet been resold or auctioned off, the automatic stay that goes into place as soon as a bankruptcy is filed will prevent the creditor who repossessed your vehicle from taking any further actions to collect the debt, which includes preventing them from being able to sell your vehicle.

If you are able to file a Chapter 13 before your vehicle is sold, your next step is to file a Chapter 13 Plan that shows that you are not only able to begin making your monthly car payments again, but that you will bring your car payments current through the Plan. If this is the case, your vehicle should be released back to you. You must also be able to show the bankruptcy court that the vehicle is a necessity and that you can afford your monthly payments by providing documentation of your income.

In a lot of instances once your vehicle’s lender receives notice of the bankruptcy as well as the Chapter 13 Plan (which shows that they will be adequately protected), the lender should willingly release your vehicle back to you. However, this is not always the case. If your lender refuses to return your vehicle to you, you will then need to ask the court for help. If you have proven that your vehicle is a necessity, that your Chapter 13 Plan gives the lender adequate protection, and that the vehicle is insured, the court should order your lender to return your vehicle to you.

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CreditReportGraphicWhat your creditors are able to report to the credit bureaus is controlled by the Fair Credit Report Act, also referred to as the FCRA, and requires your creditors to only report information that is accurate and correct. Once you receive your bankruptcy discharge your creditors are only allowed to report your discharged debts as having a balance of zero, along with the fact that is was included in a bankruptcy. In order to ensure that your creditors are reporting the most accurate information after having received your bankruptcy discharge, it is best to wait 30 to 60 days after receiving your discharge and then pull your credit report from all three credit bureaus. Once you have your credit reports from each of the three credit bureaus you should review each of them in great detail; making sure that each of your debts included in your bankruptcy is being reported as having been included in the bankruptcy and with a zero balance. If one of your creditors is incorrectly reporting the status of one of your debts you should then dispute it through the FCRA. Keep in mind that a creditor should never report a discharged debt as having a balance, being active, late, charged off, or as being a new debt.

If you are planning on filing a Chapter 13 Bankruptcy, your debts will not appear as having been included in the bankruptcy and with a zero balance until you finish your Chapter 13 Plan and receive your discharge; approximately 5 years after you file. However, as soon as you file your bankruptcy, your creditors are supposed to stop reporting to the credit bureaus under the original credit agreement. If they choose to continue reporting, they should report according to your confirmed Chapter 13 Plan. This will allow your credit report to slowly begin to improve shortly after you file bankruptcy, instead of having to wait the entire 5 years before your credit begins to improve. If a creditor is reporting information that is not correct, you dispute it through the FCRA just like you would if a creditor was reporting incorrect information after you received your discharge.

How creditors should report debts during a Chapter 13 Bankruptcy Case was decided in a 2008 case. Before then, there were no rules telling creditors how they should report a debt that is being included in a Chapter 13.

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home_under_waterMany people over the last several years have been forced to file bankruptcy because they faced foreclosure. In many of these bankruptcies, the homeowner chose to surrender their home because it did not make financial sense to try and keep it. Years later they find out that the home is still deeded in their names and are understandably shocked as they further learn they have also remained financially responsible for the property taxes, homeowner associations dues, etc. associated with that home. This is because even though you elected to surrender your home through bankruptcy and receiving the discharge relieved you from the liability of the mortgage debt, the bankruptcy did not automatically take the property out of your name and put the deed to the home in the name of your mortgage holder. So what can you do? The answer to this question is not going to be what you want to hear.

There are 2 ways in which the deed of your surrendered home can be transferred out of your name. The first is for your mortgage holder to agree to a deed-in-lieu of foreclosure. A deed-in-lieu of foreclosure is where the bank agrees to take back possession of the home and you simply sign the deed over to your mortgage holder and provide them with the keys. In order to get a deed-in-lieu of foreclosure, you must reach out to your mortgage holder and ask them if they will agree to a deed-in-lieu. If your mortgage holder refuses to accept a deed-in-lieu, your only other option is to wait for your mortgage holder to foreclose on the home. When your mortgage holder begins the foreclosure process, it is important to make sure they are only foreclosing “in rem.” This means they are only asking the court for possession of the home and not suing you personally for the debt, since the debt was discharged through your bankruptcy.

Unfortunately, it may take your mortgage holder years to begin foreclosing on the home. It is important to know that as long as the property remains deeded in your name, you will remain responsible for the property taxes, homeowner association dues, the upkeep of the property, etc. If it does take your mortgage holder years to foreclose, it could also mean you will have to wait even longer after you received your discharge in order to purchase a new home. This is because the foreclosure judgment will most likely be reported on your credit report.

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