Bankruptcy Law FAQs

Your Questions Answered by Experienced Jacksonville Bankruptcy Attorneys

Throughout our years practicing bankruptcy law, we’ve compiled questions frequently asked by those who are considering filing for bankruptcy. Our responses are intended only to provide you with a general understanding of the various events that occur during the bankruptcy process. Before you take any action regarding these matters, it is important that you contact and consult your attorney.

To schedule a free consultation, call a Jacksonville bankruptcy lawyer at (904) 574-5499 or contact us online

- How Fast Can I Get Through the Bankruptcy Process?
  The time it takes to complete bankruptcy can vary depending on the chapter under which you are seeking bankruptcy, the amount of assets involved and the way that your creditors react. But there are some general observations about the time frames of the bankruptcy process that we can state.
  Chapter 13 — which is individual bankruptcy for people who still have a regular income — usually takes the longest to complete. This is because Chapter 13 involves a repayment plan which usually remains in effect from three and five years. The petitioner cannot receive a discharge until he or she has fully completed the term of the payment plan.
  On the other hand, the Chapter 7 process can be much shorter, often being completed in only a few months. But if there are substantial nonexempt assets in the bankruptcy estate that must be liquidated or if the creditors raise objections, even Chapter 7 can take substantially longer.
  Chapter 11 is the most complex of the common types of bankruptcy and it also has the greatest degree of flexibility in the area of time frames. It can go very fast or very slow depending on how well the debtor, creditors and court work together. Complex and contentious cases can drag on for years. Conversely, for well-planned Chapter 11 cases where the debtor and creditors are able to work together, petitioners can emerge from bankruptcy within a couple of months.
- Does Chapter 11 make sense if a business still decides to liquidate?
  
  If a business wants to close in an orderly fashion or on their own terms, it is recommended that it files for Chapter 11 bankruptcy.
- Are individuals able to file for Chapter 11 bankruptcy?
  
  If an individual has a large amount of debt, they are also able to file for a Chapter 11 bankruptcy rather than a Chapter 13 bankruptcy. Many individuals opt for Chapter 11 bankruptcies because they have greater flexibility. It’s important to consider the fact that Chapter 11 bankruptcies typically require higher legal and court fees in addition to greater reporting requirements.
- What is the difference between Chapters 7, 13, and 11?
  
  When a debtor files a Chapter 7 bankruptcy, it is a complete liquidation or sell-off of assets. The court then divides the proceeds from these sales and disperses it among creditors. Chapter 7 bankruptcy is an option for both businesses and individuals.
  Chapter 13 bankruptcy is a specialized pay-off or “wage-earner” plan. This type of bankruptcy plan is typically sought out by individuals who are behind on mortgage or car payments. During a Chapter 13 bankruptcy, the debt is secured while the individual, who must demonstrate they are earning money and have a positive cash flow, pays down any outstanding debt over a period of three to five years.
  Similar to Chapter 13 bankruptcy, Chapter 11 bankruptcy is designed to keep a business intact and operating. A Chapter 11 bankruptcy reorganizes a business’ financial circumstances and the debt is reduced as the business pays creditors over time. During a Chapter 11 bankruptcy, a trustee is appointed to oversee all the payments, but the debtor remains in control of the business’ daily operations.
- What is the best interest of creditors test in Chapter 13 cases?
  
  The best interest of creditors test requires a debtor to ensure that under his or her Chapter 13 plan, any unsecured creditors receive at the very least as much as they would receive if the case were a Chapter 7. In order for this to occur, a complete liquidation analysis is required to determine what the unsecured creditors would be paid under a Chapter 7 plan. Your attorney will complete this analysis for you.
- What is the disposable income test?
  
  In some Chapter 13 cases, the debtor is ordered to commit all of his or her net pay to the plan for the plan’s lifespan. Essentially, this results in the plan payment plus any reasonable and necessary living expenses accounting for all the net pay. Any leftover net pay is given to any unsecured creditors. When unsecured creditors are paid in full, the disposable income test is not considered in the case.
  It is important to calculate your disposable income prior to your attorney filing your Chapter 13 plan.
- What role does the Chapter 13 trustee play in the case?
  
  A Chapter 13 trustee is responsible for many things during the case. The trustee becomes the disbursing agent for payments, meets with the creditors and examines the debtor in their company, and assists with the certification of the plan. The Chapter 13 trustee is also able to deny the confirmation of the plan and make determinations in each case, whether a debtor has passed the disposable income test, the means test, and the best interest of creditors test. Should the debtor be found unsatisfactory in any of the tests, the trustee is required to object confirmation. In the event of a bad faith filing or a debtor’s failure to make payments the plan necessitates, the trustee is able to file a motion for dismissal.
- What is a Reaffirmation Agreement?
  
  A Reaffirmation Agreement is a document that most mortgage companies and financers want the debtor to sign after their debt has been discharged. Once this agreement is signed, the asset is removed from bankruptcy and the debtor continues to make payments for the asset as if the bankruptcy was never filed.
  Reaffirmation agreements allow debtors to keep their homes, cars, or furniture while going through bankruptcy. Before seeking a reaffirmation agreement with a mortgage company or financer, it’s important to discuss all options with your attorney. Should a debtor stop paying for the asset after the Reaffirmation Agreement has been signed, the mortgage company or financer has the authority to foreclose or repossess it and obtain a judgement that requires the debtor to pay the deficiency.
  A debtor has up to 60 days to file a rescission agreement after the Chapter 7 has been fully executed and filed with the bankruptcy clerk’s office if he or she changes his or her mind.
- What is a Chapter 7 trustee?
  
  When you file a Chapter 7 bankruptcy in the Jacksonville Division of the Middle District, there is a panel composed of eight different trustees. There is a blind draw to determine which trustee from the panel will be assigned to your case. Each of the trustees has a background and experience in bankruptcy law. The trustee must review all necessary paperwork filed with the court and examine the debtor while under oath. The trustee must then convert all non-exempt assets of the debtor into money and use it pay both the administrative expenses and creditors according to the Bankruptcy Code. For questions about exemptions, consult your attorney.
- What is a discharge?
  
  When you file a Chapter 7 bankruptcy, a discharge is an order signed by the judge declaring discharge of all eligible debt. The Order of Discharge prevents any creditor to collect any discharged debt. Around 110 days after your Chapter 7 case is filed, your Order of Discharge is entered into your credit records. If you’re curious about which debts are eligible for discharge, consult with your attorney.
- Can I obtain credit before the bankruptcy is no longer on my credit report?
  
  Whenever you file for bankruptcy, it is kept in the public records section of your credit bureau report for 10 years. Once your discharge has been entered into your credit report, pending certain income and employment requirements, you are eligible for new automobile financing in Jacksonville. After your discharge, and with a substantial down payment, you could be eligible for new mortgage financing. Any FHA or VA financing is available two years after discharge. Because credit card solicitations begin almost immediately after discharge, it’s important to be careful to not get sucked back into attractive credit card offers and sign-up rates.
- Will I be able to transfer ownership of my property, such as my home, car, or boat, to someone else to prevent those items from
  
  Any transfer of ownership during a bankruptcy filing violates Florida’s fraudulent transfer statute in addition to 11 U.S.C. §548 of the Federal Bankruptcy Code. Any Chapter 7 debtor who is found guilty of these bankruptcy crimes could lose his or her entire discharge; in any bankruptcy involved crime, federal law can be used to initiate criminal proceedings. Instead, a trustee has the authority to set such transfers aside in addition to getting the case dismissed due to bad faith filings.
- Will certain debts remain non-dischargeable?
  
  Yes, child support, alimony, income tax, pay roll, student loans, trust fund taxes, sales tax, and property settlements are non-dischargeable. Additionally, any debtors accused of fraud, embezzlement, or conversion will have their debt found non-dischargeable.