The following is basic information about bankruptcy and the course of events you may experience in your bankruptcy case. If you cannot find the answer to your question in the information below you are welcome to direct your individual question to your attorney.

Procedure Before Filing

Handling Creditors Before Filing. If a creditor calls you after you have retained a bankruptcy attorney, tell the creditor that you have retained a bankruptcy attorney to file bankruptcy and give him your bankruptcy attorney's name and telephone number. Most bankrutpcy attorneys will respond to your creditors for a reasonable time as long as you are making progress toward filing your bankruptcy petition and payment of your costs and fees.

Use of Charge Cards. After you have retained an attorney to file bankruptcy, do not use any credit cards you intend to discharge. If you have substantial charges or cash advances incurred within the months preceding filing bankruptcy the creditor's lawyer may file an adversary complaint alleging that you incurred recent charges with fraudulent intent. You will incur additional attorneys fees to deal with adversary complaints.

Creditor Information. The bankruptcy schedules that your bankruptcy attorney will prepare for you are based upon the information you provide to your attorney. You are required to provide each creditor's name and address, the account number, the approximate date you incurred the debt, and the approximate current balance on the debt. All information you furnish regarding your creditors must be complete and accurate and it is your responsibility to assure the accuracy of that information. Creditors who do not receive notice of your bankruptcy because of an incorrect address or account number might not be discharged (the elimination of the debt) and you would still owe them money.

Collection Agencies. If a creditor has turned your debt over to a collection agency, list the creditor’s address and list the address of the collection agency or the creditor’s attorney.

List All Creditors. You are required to list all creditors, secured and unsecured. You may not pick and choose against whom you file bankruptcy. You may, however, decide to reaffirm debts to certain creditors as described below.

Bankruptcy Picture. Bankruptcy takes a picture of your financial situation on the date your case is filed. Because you are never sure on the exact filing date you will always have to provide your best estimate of items such as credit card balances and checking or savings account balances.

Contingent And Disputed Liabilities. Make certain to include all liabilities, no matter how remote. List any claim that anyone might have against you even if the claim has not matured yet. If you are a co-debtor on a note, have personally guaranteed a corporate or other debt, or are secondarily liable on a mortgage that has been assumed by a purchaser, the debt should be listed along with a brief explanation of the liability. Disputed debts and liabilities should also be listed. If you have ever had a home mortgage that was insured by a governmental agency (such as the VA, for example), be sure to list that agency as a contingent creditor. This should be done even where someone purchased the property and assumed the mortgage, since they might yet default and the VA could decide to pursue a claim against you.

Secured or Unsecured Debts. Secured and unsecured debts are listed separately. Unsecured debts include personal loans and credit cards issued by banks, such as Visa, MasterCard, Discover, and American Express. Secured debts include those debts where the creditor has a security interest in your property such as a mortgage, car loan, or furniture, electronics, or other non-consumable goods purchased using a store credit card (Sears, Circuit City, Best Buy, etc.) The store probably has a security interest in certain items purchased which makes the store a secured creditor.

Reaffirmation of Secured Debts. During the case you will have to choose to either reaffirm secured debts or surrender the secured items to the creditor. You are entitled to keep any secured property as long as you continue to pay the loan for that property. If, however, you elect to surrender secured property, the secured creditor may not thereafter recover any money from you personally on that debt.

Reaffirmation of Real Property. You can keep your personal residence as long as the mortgage is current. Equity in your home is exempt property and is protected in bankruptcy by the Florida Constitution. Any equity in real property other than your residence may be claimed by the Trustee even if the mortgage is current. If you choose to surrender your house or other real property to the mortgage lender, the lender will likely foreclose the mortgage in which event you will receive foreclosure papers from civil court. You should contact your bankruptcy attorney if you are served with foreclosure papers.

Reaffirmation of Secured Personal Property. In the case of secured store credit cards used to purchase personal property you may choose to surrender all or some items to the store, or you may reaffirm the debt as to all or only as to particular items. You do not have to reaffirm the entire card balance to keep just the property you purchased. The law requires you to execute a reaffirmation agreement for personal property you want to keep. These reaffirmation agreements will either be presented to you at your meeting with the Trustee, or they will be sent to your bankruptcy attorney and forwarded to you. Signing a reaffirmation agreement means that you will be personally liable to pay the debts after your bankruptcy is over. If you do not pay these reaffirmed loans the creditor can sue you and the bankruptcy will not protect you. If you sign a reaffirmation agreement and change your mind you may rescind the agreement for 60 days after signing or until the bankruptcy case is closed.

Exempt Personal Property. Under the Florida Constitution you are allowed to exempt and keep in bankruptcy $1,000 of personal property ($2,000 for a married couple). All personal property listed counts toward the $1,000 per person exemption.

Value of Personal Property. The bankruptcy court uses “forced sale” values in the valuation of personal property for the purposes of this exemption limit. Therefore, when you complete your Questionnaire you should value your property based on what you could expect to receive for the property at a garage sale or flea market sale. Only you know the condition and value of your property and your attorney will rely on values you submit. The Trustee has the authority to send an appraiser to your house to value your property. If the Trustee orders a property appraisal, the appraiser will contact you to make an appointment to come to your house.

Property Over Exemption Limits. If your non-exempt property exceeds the $1,000 per person limit your bankruptcy will not be rejected, but the Trustee may ask you to surrender some property or to buy back the amount over the exemption limit. Most Trustees will give you several few months to pay the non-exempt value of your property.

Income and Expenses. The bankruptcy petition includes a statement of your monthly income and expenses. If your income and expense statements show a monthly net income sufficient to repay your creditors over time, the Trustee may question the filing of a Chapter 7 liquidation and may try to convert your case to a Chapter 13 repayment plan.

Student Loans. Student loans are not dischargeable unless you can show that your loan payments impose “undue hardship.” In order to eliminate your student loans under the “undue hardship exception” you must file a separate motion with the bankruptcy court, and you must appear before the bankruptcy judge with proof of your hardship. If you are able to work, it is very difficult to prove "undue hardship" even if you are presently unemployed.

Federal Taxes. Income taxes may be discharged if they were assessed more than 240 days and due more than three (3) years (including extensions) prior to the filing of your Chapter 7 Petition. Additionally, the tax return must have been received by the IRS more than two (2) years prior to the bankruptcy filing date. If the IRS extended your filing or payment date, or if it made a later tax assessment, your taxes may not be discharged. If your attorney does not practice tax law, and if you have not retained your attorney to assist you with tax issues, you should contact the IRS, your tax advisor, or a tax attorney.

Tax Refunds. Income tax refunds are assets, and you should list on your Questionnaire a refund you expect to receive from a prior year’s tax withholding. If you are due a significant tax refund on your filing date, the Trustee will take your refund.

Automobiles. You are allowed a $1,000 automobile equity exemption ($2,000 for a married couple). Any equity you have in a car is considered personal property and is counted toward this $1,000 exemption. If you own your car free and clear, the entire car value is equity. If you have a car loan, only the excess of the car’s trade-in value over the current loan balance is considered equity. Most people with car loans owe more than their car is worth (“upside down”), in which case, they have no equity in their car. To determine the value of cars, most Trustees rely on NADA values and apply the average of the wholesale and retail value. You may want to obtain your own appraisal of the car’s value if you believe it is worth less than NADA book value. Your attorney will rely on the value you provide for your Petition. It is recommended that you go to NADA or Kelly Blue Book to verify vehicle values.

What Happens If You Have Car Equity Which Is Not Exempt? If you have significant equity in your car which is not covered by the $1,000 vehicle exemption 222.25 or by the $1,000 personal property exemption, the Trustee may seek to seize the equity. The Trustee may ask that you either surrender the car so that it can be sold by the Trustee or that you purchase the amount of the car equity from the Trustee, in which case you will be giving the Trustee cash in place of your car equity. Trustees are not required to offer you any payment plan to repurchase your equity, although most Trustees may allow a few months to buy back the equity. In the event you have non-exempt car equity, you may have to buy the equity from the Trustee and still make payments on your car loan.

Car Lease. If you lease a car you do not list the car as your personal property. In Chapter 7 you may turn in the car and discharge the debt to the lessor, or you may continue to pay the lease and reaffirm the debt. Be sure to list your car lease under Executory Contracts and list the leasing company as an unsecured creditor.

After Filing The Petition

When your bankruptcy attorney files your petition and schedules with the bankruptcy court, a combined order scheduling a Meeting of Creditors and fixing filing dates for claims, complaints objecting to discharge, and complaints seeking exception to discharge will be sent by the Court to all creditors, to you, and to your attorney. This is commonly referred to as the “341 Notice” or the “Creditor Meeting Notice”. You should receive your copy of the Notice from the bankruptcy court approximately ten (10) days after your petition is filed.

Information About Your Case. If you want information about your case, including your case number, meeting date with the trustee, discharge date etc., you should call VCIS. VCIS stands for Voice Case Information System and when supplied with either social security, employer identification number or debtor name a search can be accomplished. This service will give you the following information if case has been filed: when it was filed, the judge assigned, debtor's attorney and phone number, trustee assigned and phone number, 341 meeting of creditors date and time, and chapter filed. The number for the Middle District of Florida is 1-866-879-1286 (access for courts in Jacksonville, Tampa, and Orlando).

Handling Your Creditors After Filing. The Notice of Creditors Meeting is mailed to your creditors about one week after the petition is filed. If a creditor contacts you after you have received the 341 notice, inform them that you have filed bankruptcy, give them your case number, and ask that they no longer contact you as is stated in the 341 Notice. If you receive any bills after filing you should mail a copy of the 341 Notice to the creditor with the bill. If a creditor continues to call you or write to you after you have informed him of your bankruptcy case number and filing date make a record of the creditor’s contact including, if possible, the name of the person contacting you, dates, and times of contacts. You may want to keep a log of unauthorized creditor contacts after your bankruptcy filing. If a creditor continues to contact you, you should contact your bankruptcy attorney who will take the appropriate steps.

The Automatic Stay. The automatic stay commences immediately upon the filing of the bankruptcy petition. It acts like a shield between you and your creditors during the bankruptcy. The Stay prohibits the commencement or continuation of creditors’ judicial proceedings against you as well as all collection efforts. If you are a defendant in a foreclosure case in civil court and intend to reaffirm the debt to save the property, your attorney will file a Suggestion of Bankruptcy in the civil court case. This does not mean your bankruptcy attorney represents you in your civil case.

Motion for Relief from Stay. In Chapter 7 cases secured creditors typically file a Motion for Relief from the Automatic Stay so that they are able to foreclose on your secured property in the event you do not pay the secured debt in a timely manner. Creditors' lawyers will file this motion even if you intend to reaffirm the secured debt and even if your payments are current because the creditor wants to protect its rights in the event you do default in your payments. The court will usually grant this Motion. The Court’s granting of this motion does not mean that the creditor can take your property. The creditor can take your property only if you do not pay the loan in a timely manner under the terms of your mortgage or loan contract with the creditor.

Procedure for Stay Motions. When a secured creditor's lawyer files a Motion for Relief from the Stay, the court will set a hearing. You do not have to attend the hearing unless you want to contest the Motion. You should contact your bankruptcy attorney if you have questions concerning the Motion or hearing.

Contesting the Motion for Relief from Stay. In the event it is in your best interest to contest this Motion in order, for example, to delay a foreclosure, delay a repossession, or some other reason why a relief from Stay should not be entered, you should contact your bankruptcy attorney.

Adversary Cases. If a creditor believes it should not be discharged it's attorney may file, or threaten to file, an Adversary Case against you during the bankruptcy proceeding. The most common grounds for the filing an adversary case is “fraud.” Fraud in this context is not criminal, but it means that you allegedly have abused the bankruptcy process. If you use credit to buy property or take cash advances prior to filing bankruptcy when you were insolvent, did not anticipate repaying the debt, or planned to file bankruptcy this could be grounds to set aside a discharge of debt for fraud, and the creditor may have a basis to file an adversary case. Many creditors file cases as a business strategy in order to pressure debtors to reach a settlement where the debtor will agree to repay part of the debt.

Adversary cases are separate legal proceedings and are not part of your bankruptcy filing. If an adversary letter is received or if an adversary case is filed against you by a creditor's lawyer, your bankruptcy attorney will send you a copy of the Complaint. You have several options. You may believe that the creditor’s allegations are false, and that you have valid explanations for all the contested debt. In that event, you may refuse to offer any payment to the creditor, wait for the creditor's lawyer to file an adversary lawsuit, and defend the adversary case in a hearing before the bankruptcy judge. If an adversary Complaint is filed, you will have 20 days to file an Answer to the Complaint or you will be in default and lose. After you file an Answer the court will schedule an evidentiary hearing before the bankruptcy judge where you will have to present testimony and documents in support of your position.

Secondly, you may try to reach a money settlement with the creditor. Although creditors are not required to accept any settlement, most are willing to negotiate a settlement in the majority of cases. A typical settlement would involve your paying 50 to 60% of the creditor’s claim in a single payment, or alternatively, 70 to 80% of the same claim in monthly installments over six to twelve months. These figures are only examples of a typical negotiated settlement, and your settlement may differ depending on the creditor and the facts of your case. If you want to negotiate a settlement with a creditor, you should contact your bankruptcy attorney.

The third option is to do nothing in response to this creditor, allow the creditor to file an adversary case, and allow the creditor to have a judgment entered against you. The problem is that you may acquire additional property in the future which may be subject to levy and attachment by the creditor who gets a judgment through the adversary case. In addition, this judgment will be on your credit report for at least seven years.

Trustee's Motion to Value Property. The Trustee may also file an adversary case to recover non-exempt property or a motion to value property which he believes you have undervalued in order to exempt under your $1,000 personal property exemption. If the Trustee convinces the court the increase the property value, he can then recover any of your property in excess of your exemption limit.

Transferring Property After Filing. Immediately upon the filing of a bankruptcy petition, a legal “estate” is created by the law which consists of everything you own at the time you filed bankruptcy. This is called the “bankruptcy estate.” In fact, one of the Trustee’s principal duties is to collect the bankruptcy estate (that is, locate and assume jurisdiction over all the property). You should never sell, give away, or transfer any of your real or personal property which is part of your bankruptcy estate either immediately before or after the filing of your petition without first checking with your bankruptcy attorney or the Trustee.

Property You Acquire After Your Case is Filed. Any property you acquire after filing is not part of your bankruptcy estate and is yours to keep. For example, you can retain any money earned from employment after the filing date. As soon as your case is filed, you may purchase a new car, new home, or any other item without permission from the Trustee, provided however, you do not use as a down payment non-exempt property which is part of your bankruptcy. You may also deposit money in your bank accounts immediately after your case is filed.

Cash deposits held by a creditor. Some debtors have checking or savings accounts in banks or credit unions, and they are seeking to discharge loans owed to the same banks or credit unions in bankruptcy. A lender may not seize money in a checking account to collect a loan obligation after you have filed bankruptcy unless the loan documents give the lender a security interest in the debtor’s checking or savings accounts. You should read your loan documents or contact your creditor if you are in this situation. Many credit unions will make you close your checking and savings accounts if you discharge a loan or credit card debt from the same credit union. In such event, you will have to open new checking and/or savings accounts at a different financial institution. Additionally, your credit union loan may be secured by funds in your credit union accounts, and in such event, the credit union can seize money in these accounts to pay the loan prior to the filing of your bankruptcy petition.

What is a Trustee and What Does He Do? The “Bankrupt Estate” consists of all legal and equitable interests you have in property as of the date the case is filed. In a Chapter 7 case, one primary job of the Trustee is to gather all of your non-exempt assets, sell the assets, and distribute the proceeds pro rata (that is, at “X cents on the dollar”) among all your creditors. In Florida an Interim Trustee is appointed by the Court immediately upon the filing of a Chapter 7 petition. This Interim Trustee is selected from a standing panel of Trustees and begins administration of the case and is usually a private attorney. The Trustee is compensated by a percentage of the funds he is able to collect.

Creditors Meeting with Trustee. A meeting with your Trustee and some creditors (“the 341 Meeting”) will be held approximately four weeks after your attorney files your petition with the Court. The meeting is held in a meeting room, not the court room, and the federal bankruptcy judge is prohibited by law from being there. Typically this meeting will last about five minutes. You are required to attend the 341 Meeting (if filing jointly, both husband and wife must attend). Your bankruptcy attorney will accompany you and represent you at the meeting. As a practical matter very few, if any, unsecured creditors or their lawyers attend. Usually, the only creditors who attend are representatives of stores such as Sears who hold a security interest in items purchased on their store credit cards.

What Happens at the 341 Meeting. It is normal to be nervous about the creditors meeting, but in almost all cases you will find this meeting is not difficult. The Trustee will ask you questions, but he will not interrogate you, cross-examine you, or threaten you. It may help you to anticipate some of the questions you will be asked. Here is a sample of common questions which make up your brief examination:

Have you listed all your assets and debts on your schedules?

Does anybody owe you money?

Do you have any reason to sue anybody?

Are you the current beneficiary of a will or trust?

How did you arrive at the value of your car and other property?

Have you repaid any debts to family within the past year?

Have you recently sold or transferred any property?

Do you expect to receive an income tax refund?

Does anyone have property that belongs to you?

Have you owned any cars in your name in the past year?

What if you cannot attend the meeting? If you are unable to attend the 341 Meeting you should notify your bankruptcy attorney in advance. The Trustee will usually grant a one-time continuance and schedule a “make-up” meeting approximately two weeks after the first date. If you do not attend the second meeting the Trustee will move to dismiss your case.

Bankruptcy Procedures after the 341 Meeting.

After the Creditors Meeting, there is a 60-day period during which time creditors can file claims if they believe there is money to be disbursed by the Trustee, or creditors may object to being discharged if they have legal grounds. Grounds for objection to discharge include the debtor’s fraud, student loans, alimony and support obligations etc.

Discharge. Approximately 60 days following the Creditors Meeting you should receive a copy of a court order that discharges your debts. The discharge order wipes out your debts and liability to creditors in your bankruptcy. Do not expect to receive your discharge immediately after 60 days. You should keep a copy of the discharge order because you may need it in the future to get new credit and for other reasons. The entry of a discharge order does not affect a secured creditor’s rights in property which you pledged to repay the secured creditor. The secured creditor can always repossess the property if you do not pay according to your loan agreement. In addition, the discharge order only discharges debts that are "dischargeable." Therefore, the order does not eliminate non-dischargeable debts, such as ineligible student loans, ineligible tax liability, or loans procured by fraud or by abuse of the bankruptcy system.

Closing the Case. Approximately 30 to 45 days after the Discharge you will receive another notice stating that your case is closed. This means that your bankruptcy case is over.

Life After Bankruptcy

Bankruptcy and Your Credit Rating Bankruptcy will appear on your credit report for several years (usually 7 to 10). This does not mean you cannot get credit after filing bankruptcy. Most lenders will extend credit within two or three years after filing a bankruptcy case. Many creditors consider you a better credit risk after you filed bankruptcy because you have few other debts, if any, and you are unable to file bankruptcy again for seven years.

Generally, the effect of bankruptcy on your credit is not a bankruptcy issue; it is a banking or credit issue. Most questions concerning reestablishment of credit are best answered by people at banks, credit agencies, or consumer credit services.

Many clients report that after filing bankruptcy and receiving their discharge notice that their credit reports still show certain debts as “written off” or “discharged.” Regardless of what is on your credit report no creditor listed in your bankruptcy can collect money from you. If your credit report incorrectly reports certain debts you must resolve errors directly with the credit bureau because no bankruptcy law issues are involved in the incorrect reporting of your credit history.

Bankruptcy and Employment. It is illegal for an employer to discriminate against you in any way because you have filed bankruptcy.