Frequently Asked Questions

What is the difference between a Chapter 7 and Chapter 13?
Chapter 7 is a liquidation bankruptcy. A trustee is appointed and can sell your non exempt assets for the benefit of your creditors. Chapter 13 is a reorganization. It can be used to save your home from foreclosure. Your payment to the court is based on your income, expenses and your non exempt assets.

How will a bankruptcy affect my credit?
A Chapter 7 bankruptcy will remain on your credit report for 10 years. A Chapter 13 bankruptcy stays on the credit report for 7 years. Notwithstanding the length of time that the bankruptcy stays on your credit report, many people find that they are able to obtain new credit including automobile loans and low money down FHA mortgages during the time that the bankruptcy is still being reported on their credit report.

Can I transfer assets to someone else before I file a bankruptcy?
Transferring assets to friends or family members prior to the bankruptcy is a terrible idea. Your bankruptcy schedules require you to disclose transfers, the trustee will ask about transfers at the 341 meeting, the trustee can attempt to undo transfers considered to be fraudulent. If a trustee finds out about a transfer that you did not disclose, it can lead to the denial of your bankruptcy discharge.

What is the Mean Test?
The Means Test is used to determine if you qualify for a Chapter 7. It takes into account your family size, household income and expenses to determine if you have disposable income available to pay towards your debts. If you fail to pass the Means Test you may be unable to file a Chapter 7, but still may be able to file Chapter 13. The amount of your disposable income is used to determine the amount of your monthly payment in a Chapter 13 reorganization.

What are exempt assets?
Bankruptcy exemptions are designed to protect a certain amount of your assets in a Chapter 7 bankruptcy. Exemptions also help in determining how much certain creditors will get paid through your bankruptcy plan if you file a Chapter 13 bankruptcy. If you can “exempt” assets in bankruptcy it means that the Chapter 7 trustee cannot take it and sell it to pay your creditors.

How will a Chapter 7 bankruptcy affect my credit?
A Chapter 7 bankruptcy will remain on your credit report for 10 years. Notwithstanding the length of time that the bankruptcy stays on your credit report, many people find that they are able to obtain new credit including automobile loans and low money down FHA mortgages during the time that the bankruptcy is still being reported on their credit report.

What is a 341 Meeting of Creditors?
At the meeting the trustee will question you about assets, income and issues that may arise after the review of your bankruptcy schedules, tax returns and bank statements. Due to the duration and nature of the meeting, it is very unlikely that any creditors will attend.

Will I lose my house if I file a Chapter 7 in Florida?
Florida has the “Homestead Exemption” which means that 100% of the equity in your home is considered untouchable by your creditors or a federal bankruptcy trustee. There are some exceptions, for example the exemption does not apply to secured creditors such as a mortgage company or association.

Can my Chapter 7 be denied?
It is possible to have your bankruptcy denied, but such denials are reasonably easy to avoid. If you are accurate to the best of your ability when you answer the questions asked on the bankruptcy forms and questions asked by the trustee you should have no issues.

Does a Chapter 7 help if my house is in foreclosure?
Chapter 7 will delay a foreclosure and wipe the possible deficiency claim of the mortgage company if you want to sell it at a short sale or let it be foreclosed. A Chapter 7 will not force the bank to modify your mortgage; you will need a Chapter 13 for that.

Why file a Chapter 13 bankruptcy?
A Chapter 13 can save your home by giving you 5 years to catch up on your mortgage and your home being lost in foreclosure. A Chapter 13 can give you debt relief if you make too much money to file a Chapter 7 or do not want to lose non exempt assets in a Chapter 7.

If I file Chapter 13, will I end up paying all of my debts back?
The majority of those who file Chapter 13 are not required to pay all of their debts back. The repayment is based on your household income, expenses, and non exempt assets.

How will a Chapter 13 bankruptcy affect my credit?
A Chapter 13 bankruptcy stays on the credit report for 7 years. Notwithstanding the length of time that the bankruptcy stays on your credit report, many people find that they are able to obtain new credit including automobile loans and low money down FHA mortgages during the time that the bankruptcy is still being reported on their credit report.

How can Chapter 13 help save my house?
The filing of a chapter petition results in an automatic stay of the foreclosure proceeding. A Chapter 13 bankruptcy will allow you to make monthly payments to catch up on your back payments.

What happens if my income goes down or I lose my job while I am in a Chapter 13 case?
If your income goes down or you lose your job, it may be possible to reduce your payment by modifying the Chapter 13 plan. It is also possible to convert your Chapter 13 case to a Chapter 7 if your income now allows you to qualify for Chapter 7.

Can Chapter 13 lower my car payments?
A Chapter 13 can often reduce payments by reducing the amount principal balance owed to the lender based on the current value of the car. It can also reduce the interest rate to a more favorable rate (i.e. not the 12 to 15 % that some people pay with less than perfect credit).