What Is Bankruptcy?
If you are having trouble paying your debts, bankruptcy may be the best remedy
for your situation. An individual can file for bankruptcy to obtain a discharge,
which will wipe out your debts. Once the bankruptcy begins, creditors cannot try
to collect debts from the bankruptcy debtor or sue the debtor to obtain a judgment.
With a few exceptions, the creditors have no claim on the debtor's future income
or future assets.
Individuals have the right to represent themselves before a Bankruptcy Court. However,
bankruptcy is a complex area and involves many considerations, including whether
to file, the election of the appropriate chapter, use of exemptions, and understanding
all of the protections of the Bankruptcy Code while using them to the debtor's advantage.
CAPITAL LAW CENTER, Robert W. Carlson & Associates, P.A. can help you make the right
decisions after evaluation of your family status, your assets, your obligations
and other factors. It is a very serious step that could affect you for the rest
of your life. You need the guidance of CAPITAL LAW CENTER, Robert W. Carlson & Associates,
P.A. We can help explain how the process works and can help you reach intelligent
decisions that will benefit you.
Types of Bankruptcy: There are three main types of bankruptcy.
 Read More about bankruptcy
This is a liquidating bankruptcy, the most common bankruptcy case. In return for
having debts discharged, the debtor must turn over to the bankruptcy trustee all
property except for certain assets which Florida law allows the debtor to keep as
exempt. The trustee sells the property and distributes the proceeds to the creditors
according to priorities established by law. Very often there is not enough money
to pay for anything more than the costs of administration, and the creditors will
receive nothing. The principal advantage of Chapter 7 is that the debtor emerges
from bankruptcy without any future obligations on his or her discharged debts.
Another type of case in bankruptcy is Chapter 11 reorganization. It is generally
used by businesses, or by individual debtors who do not qualify for Chapter 13 because
of their substantial debts, and/or have assets that would be lost in Chapter 7.
In a Chapter 11 case, the creditors are temporarily stopped from taking any action
against the debtor while the debtor tries to work out a plan of reorganization.
Such a plan may involve a method of paying all or part of the debts or claims. The
debtor may also deal with taxes through a plan. The creditors vote on the plan and
it must also be approved by the court. The Debtors typically use Chapter 11 to preserve
an ongoing business or source of income that might otherwise be lost in liquidation.
Chapter 11 can be complicated and costly.
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This case often used by individuals who want to catch up past due mortgage or car
loan payments and keep their assets. In Chapter 13, the debtor must propose in good
faith to pay all or part of the debts from future income over a period of time ranging
from three to five years. If the court approves the plan of payment, the debts may
be settled in this manner, even if the creditors are not willing to go along with
the plan. If the debtor makes the payments as required, he or she will not have
to surrender property to the trustee. Chapter 13 can be more advantageous than a
liquidating bankruptcy. Some of the debts not discharged in a Chapter 7 will be
discharged once the debtor completes a Chapter 13 plan. Also, the debtor can pay
most non-dischargeable federal taxes over the term of the Chapter 13 plan without
interest. However, Chapter 13 can only be used by an individual debtor, not by a
corporation, and only if the total debts owed are less than certain limits for secured
and unsecured debts. An individual engaged in business not as a corporation might
use Chapter 13 to pay debts or settle them over a period of time while he or she
continues to own and operate the business.
Bankruptcy eliminates debt and does not generally affect creditors’ liens on collateral,
such as a mortgage on a home or a car loan; however, judgment liens and some liens
on personal property, called "non-purchase money security interests," may be avoided
if they are liens on exempt property. If a debtor wants to keep his or her house,
generally the debtor must continue the payments on the mortgage. If the debtor wants
to keep a car which is possesses a lien from the bank, he or she must likewise continue
the payments. A debtor facing foreclosure on his or her home may use Chapter 13
to repay past due payments and other costs, while also making the regular mortgage
payments, and keep the home. In a Chapter 7 liquidating bankruptcy, certain property
can be "redeemed" from a lien by an appropriate proceeding in the bankruptcy, which
would require paying to the lien holder the market value of the property.
If a creditor or the trustee objects, a debtor may be denied a discharge and continue
to owe the debts as if the bankruptcy had never been filed. Some of the reasons
for being denied a discharge are fraudulent transfer of an asset to keep it away
from creditors or the bankruptcy trustee, concealment of assets, or disobeying or
making a false statement to the court. Such acts may also constitute federal crimes
for which the debtor can be fined or imprisoned.
Certain types of debts, such as child support, alimony, some federal income taxes,
and all employer withholding taxes cannot be discharged in bankruptcy. Generally,
student loans cannot be discharged. The debtor's wrongful conduct may make some
debts non-dischargeable in a liquidation bankruptcy, such as incurring credit card
charges when the debtor had no intent or ability to repay, or obtaining loans using
false financial information.
Alternatives to Bankruptcy
Bankruptcy is not the only method of dealing with too much debt. In some situations
another way might be more advantageous than filling for bankruptcy. Such alternatives
may include an out-of-court settlement with creditors or payments of debt by sale
of assets or borrowing on assets. Call us immediately for a FREE consultation at
1-866-533-2533 and help us, help you!
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