BANKRUPTCY

CHAPTER 7
Chapter 7 is sometimes called “fresh start” bankruptcy because it can relieve you completely of some kinds of debt (such as credit card debts and medical bills) and temporarily stop foreclosure.  The new bankruptcy law requires that anyone who files bankruptcy must receive credit counseling and financial education by approved providers as a condition for filing bankruptcy and discharging debts. No one can file bankruptcy unless they complete accredited credit counseling within 180 days of their bankruptcy filings. The credit counseling can be provided in person, by telephone conference, or over the internet. You have to pay for credit counseling, but the costs will be regulated by the United States Bankruptcy Trustee office. You will be required to file a certificate from the credit counseling agency verifying the course completion with your bankruptcy petition.

For individuals filing Chapter 7, most debts, including some tax obligations, are discharged. Some debts, including recent tax obligations, trust fund obligations, child support and alimony generally cannot be discharged. Other debts may not be discharged if the creditor can prove improper conduct on the part of the debtor.  The debtor is allowed to keep exempt assets. For individuals filing bankruptcy in Florida, the exemptions are primarily determined by Florida law. They include the debtor’s homestead, (subject to a cap of $125,000.00 in equity if owned less than 1215 days), a debtor’s interest, not to exceed $1,000.00 in a single motor vehicle, a debtor’s interest in any professionally prescribed health aids, monies paid into the Prepaid Post-Secondary Education Expense Trust Fund, and $1,000.00 per individual in miscellaneous personal property. Certain other assets such as the cash surrender value of life insurance policies, annuity contracts, IRA’s and pension plans may be exempt also. All non-exempt assets must be turned over to the Chapter 7 trustee for liquidation and distribution to creditors.

CHAPTER 13
A Chapter 13 bankruptcy, or "wage earner reorganization" is available only to individuals with regular income. It requires that the debtor file a plan providing for payment to creditors over a period of up to five years. The benefits of a Chapter 13 include the ability to reinstate a home mortgage that is in default, stop IRS collection efforts while payments are made, the ability to retain non-exempt real estate and personal assets, and a broader form of discharge. Within 14 days after filing a Chapter 13 Petition, a Chapter 13 Plan will be prepared which will propose a plan to pay your creditors on a monthly basis through a single monthly payment to the Chapter 13 Trustee. The Plan and the amount of your monthly payment to the Trustee is based on the income and expenses you provide to your bankruptcy attorney.  The Chapter 13 Plan will include all of your regular monthly payments on secured items plus an amount for attorneys fees, arrearage on each account, trustee’s fees, and administration fees. You must show you have the ability to make these payments on the income and expense Schedules submitted with the Petition.
If you fail to make any Plan payment to the Trustee on time, the Trustee will file an affidavit of default and serve it upon you. Thereafter, you will have 21 days to make the overdue payment plus the next payment due under your Plan. Therefore, being late will cause you to make a total of two payments within the 21-day grace period in order to save your Chapter 13 bankruptcy.
Effect of Non-Payment. When a Chapter 13 case is dismissed for non-payment, the Court will enter an order prohibiting you from filing another Chapter 13 case for up to six (6) months. If one of your payments is late, the Trustee will issue an Affidavit of Non-Payment. In that event you will have 21 days from the date of the Affidavit to make all payments currently due plus any payments that come due within the 21-day period. If you do not pay the missed payments or enter into a payment program with the Trustee within the 21-day period after the Trustee’s Affidavit of Non-Payment, your Chapter 13 case will be dismissed for non-payments.