How to File for Bankruptcy: A Comprehensive Guide

JodatOctober 18, 2024

Filing for bankruptcy in Florida is a significant legal step that can help individuals or businesses regain financial control when overwhelmed by debt. This guide will walk you through the entire bankruptcy filing process, the types of bankruptcy, and essential details to consider before making this decision.

Types of Bankruptcy We Serve

Chapter 7 Bankruptcy: Liquidation

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is one of the most common forms of personal bankruptcy. It allows individuals to discharge most of their debts by liquidating non-exempt assets to pay creditors. It’s suited for people with little income or no assets. Once approved, the individual is relieved of certain debts, including credit card balances, medical bills, and personal loans.

• Eligibility: A means test determines if your income is low enough to qualify.
• Process: Non-exempt property (if any) is sold, and the proceeds go to creditors. The rest of your debts are discharged.
• Timeline: Typically lasts 3 to 6 months.

Chapter 13 Bankruptcy: Reorganization

Chapter 13, or the “wage earner’s plan,” is designed for individuals with regular income who can pay off their debts over time. This type of bankruptcy allows filers to keep their property, including their home, while they follow a court-approved repayment plan over 3 to 5 years.

• Eligibility: Individuals with secured and unsecured debts below a certain threshold are eligible.
• Process: Debtors propose a repayment plan to pay off creditors. After completing the plan, remaining dischargeable debts are forgiven.
• Timeline: Takes 3 to 5 years to complete the repayment plan.

Steps to File for Bankruptcy

1. Evaluate Your Financial Situation

Before starting the bankruptcy process, analyze your financial circumstances carefully. You may want to consider alternatives such as debt settlement, consolidation, or credit counseling. Bankruptcy should be a last resort.

2. Choose the Right Type of Bankruptcy

Understanding which chapter of bankruptcy suits your situation is crucial. Chapter 7 is for those without the ability to repay their debts, while Chapter 13 is for individuals who can afford to follow a repayment plan.

3. Complete Credit Counseling

Federal law requires individuals to complete credit counseling from an approved agency within 180 days before filing for bankruptcy. This session helps determine if you have viable alternatives to bankruptcy.

4. File the Bankruptcy Petition

You will need to file a bankruptcy petition with the bankruptcy court. The petition includes detailed information about your finances, assets, debts, income, and expenses. You must provide:

• A list of creditors
• Statement of income and expenditures
• Property details
• Contracts and leases

5. Pay the Filing Fees

Bankruptcy filing fees vary based on the type of bankruptcy you are filing. The current filing fee is generally around a few hundred dollars. If you’re unable to pay the fee upfront, you can request to pay in installments or ask the court to waive it in Chapter 7 cases.

6. Automatic Stay Comes into Effect

Upon filing for bankruptcy, an automatic stay immediately goes into effect. This legal order halts most collection actions against you, including wage garnishments, foreclosure, repossessions, and creditor harassment.

7. Attend the Meeting of Creditors (341 Meeting)

After filing, you must attend a 341 Meeting of Creditors, which is a mandatory hearing. At this meeting, the bankruptcy trustee and your creditors may ask questions about your finances and the bankruptcy documents you’ve filed. This typically takes place about 30 days after filing.

8. Complete a Debtor Education Course

To receive your bankruptcy discharge, you are required to complete a post-filing debtor education course. This course focuses on managing your finances and avoiding future debt problems.

9. Discharge of Debts

Once you’ve completed all the necessary steps, the court will issue a discharge of debts. This means you are no longer legally required to pay certain debts, and creditors can no longer pursue collection activities for those discharged debts.

Debts That Can and Cannot Be Discharged

Not all debts are discharged in bankruptcy. Here’s a breakdown:

Debts That Can Be Discharged

• Credit card debt
• Medical bills
• Personal loans
• Utility bills
• Certain taxes (depending on the age of the tax debt)

Debts That Cannot Be Discharged

• Student loans (except in cases of extreme hardship)
• Child support and alimony
• Recent tax debts
• Court fines and penalties
• Debts from fraudulent activities

Consequences of Filing for Bankruptcy

Filing for bankruptcy has long-term financial implications:

• Impact on Credit Score: A bankruptcy filing will remain on your credit report for up to 10 years, significantly affecting your ability to get loans, mortgages, or credit cards.
• Loss of Property: In Chapter 7 bankruptcy, non-exempt assets can be sold to pay creditors.
• Public Record: Bankruptcy filings are public, which may impact your reputation and financial standing.
• Difficulty in Obtaining New Credit: After bankruptcy, it may be harder to qualify for loans or lines of credit. However, many debtors can rebuild their credit over time.

Rebuilding Your Financial Future Post-Bankruptcy

Filing for bankruptcy can provide a fresh start, but it requires a commitment to rebuilding your finances.

1. Create a Budget and Stick to It

Post-bankruptcy, developing a realistic budget that reflects your income and expenses is essential. Keeping a close eye on spending habits will help you avoid falling into debt again.

2. Rebuild Your Credit

You can start rebuilding your credit by:

• Obtaining a secured credit card
• Making all payments on time
• Keeping credit card balances low
• Reviewing your credit report regularly

3. Consider Professional Financial Advice

Engage with a financial advisor or credit counselor to help you create a long-term financial plan. They can guide you in saving for emergencies, managing debts, and setting realistic financial goals.

Hire an Attorney – Who’s That? Jodat

Contact us today for your Free Consultation in Bradenton, Sarasota, or Venice, Florida.