Filing Bankruptcy? 8 Things You Need to Know


June 30, 2014

Filing for bankruptcy is a difficult decision. There are a number of things to consider. Your reasons for filing are important and will help determine which type of bankruptcy you should seek. Before you begin the process, take some time to study these steps to success.

Ask: Is Bankruptcy Right for Me?

Many people see bankruptcy as a quick fix when it may be overkill. If there is a reasonable way to avoid bankruptcy, now’s the time to really consider your alternatives.

Bankruptcy provides an unmatched benefit, but it can come at a cost. For some people, as part of the cost for bankruptcy’s benefit, they be required to give us some of their personal belongings that are outside of the allowance (called “exemptions”) provided in bankruptcy. Also, some types of debt cannot be discharged through bankruptcy.

Depending on the amount of debt owed, your income, and whether there is any litigation that has been filed, it could make more sense to first try to settle your debts outside of court. But this decision should be made carefully – if you settle your debts, and then still file bankruptcy, the bankruptcy court may require that the money you paid out gets returned. This is a called a “preference.”

There are a lot of consideration that go into this initial planning step, and that is why it is a great time to speak with an attorney, to see what the benefits and pitfalls of bankruptcy are.

Choose the Right Chapter

There are two types of bankruptcy available to debtors, Chapter 7 and Chapter 13. It is important that you choose the one that best fits your needs before you begin the paperwork process. The Chapter that you file under will influence:

  •  How long your bankruptcy process will be;
  • How much you have to pay into the bankruptcy court;
  • What personal belonging you get to keep;
  • And many other factors throughout the bankruptcy process.

For some individuals, they have a choice in what Chapter they can file under. Other individual must file for a specific Chapter based on their qualification.

There are various stages of the bankruptcy process that are significantly easier with the assistance of a bankruptcy lawyer. Starting off on the right foot and choosing the correct type of bankruptcy is just one of those situations where a law professional can help.

Follow All Requirements

Before your debt can be discharged, you’ll be required to complete some educational and preventative courses. You’ll be expected to get credit counseling and financial management education.

You will have to provide proof of completion before the court will discharge your debt. If you fail to provide proof you are at significant risk of having your case dismissed. While we know that many individuals are forced into bankruptcy due to circumstances beyond their control, the Courts hopes that education can be a tool to prevent the need for future bankruptcy.

Follow the Local Court Rules

Bankruptcy Courts at separated by the federal districts. This is different from your county. Florida, for example, has three federal districts – Northern, Middle, and Southern. Within each district are different divisions. Most cases that come out of the greater Tampa Bay area are almost all filed in the Tampa divisions for the Middle District of Florida.

Local rules, procedures, and forms are adopted based on a courts district and division. See, for example, the local rules for the Middle District of Florida. Understanding the rules, procedures, and forms for your district and division can be very important to a case. For example, Tampa and Fort Myers have their own format for a Chapter 13 plan. If that format isn’t used, the Court will likely deny the Chapter 13 plan based upon formatting alone.

Similarly, each bankruptcy trustee has their own set of preferences in how to handle a case. Being familiar with the trustees can help keep a case moving smoothly.

Use Exemptions Correctly

One of the trade-offs in a Chapter 7 bankruptcy is the stuff you can keep. The government tells us that if they are going to give a fresh start on debt, they don’t want us to start over with a personal jet plan, 6 house, and all the riches one can imagine. So they give a list of what we can keep. We call this list your “exemptions.” Understanding the exemptions is important, because if you do not apply an exemption that you are entitled to, you could lose something that you’d otherwise be able to keep. Similarly, if you use the wrong exemption, then you could receive an objection and lose your belongings.

Even though bankruptcy is filed through the Federal Courts, in Florida we generally use State law for our exemptions. Verifying your state’s laws on bankruptcy eligible exemptions is imperative. Chapter 7 exemptions will allow you to keep some assets while Chapter 13 exemptions will enable you to reduce unsecured creditors’ payment requirements.

Go to all Meetings

Roughly a month after you file for bankruptcy, you will be required to attend the 341 meeting, also known as the Meeting of Credits. Your creditors are entitled to appear that the meeting, although they do not always do so.

The bankruptcy trustee will be permitted to ask you questions under oath. They will expect answers about your financial affairs. If you fail to attend this meeting, the court may dismiss your case.

Make a Valid Chapter 13 Repayment Plan

If you’ve chosen to file Chapter 13, you will be required to create a repayment plan. This plan will have to be feasible. You’ll have to do your research to guarantee that it adheres to all applicable bankruptcy laws. This is another very difficult aspect of filing bankruptcy on your own.

Filing Bankruptcy is Serious

Making a financial decision of this magnitude is no quick process. If you’re serious about eliminating your debt via Chapter 7 or 13, make sure you do all your research. Don’t forget any forms or documentation and attend all meetings.

Bankruptcy is a difficult obstacle to hurdle. Don’t be afraid to get assistance.

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