Popular Questions About Bankruptcy
What I would like to do is review the five most frequently asked bankruptcy questions. There are literally hundreds of questions that we are asked in our bankruptcy consultations, and you may have some that we do not touch on here. Of course, we will be more than happy to answer any additional questions at the time of our meeting.
1. Can I keep my home? The first question we are asked if someone owns a home, is can I keep my home? The answer is yes. The issue then becomes whether you can continue to make your payments because you would have to be able to continue to make your payments so you can keep your home. If you are in arrears, meaning you have not made your payments, you could still keep your home but it will require that you file a Chapter 13. In a Chapter 13, you can take the arrears that you owe and spread them out over the life of the Plan—again, anywhere from 36 to 60 months. Therefore, a Chapter 13 does allow you to keep your home and make up your arrears. If you are current on your payments, you can continue to make your payments under a Chapter 7 and keep your home.
2. Can I keep my car?: The answer again is yes. If you have a loan on the car, the issue becomes, are you current on your loan and can you afford the payments? If not, there are still ways to keep the car and make up the difference of the arrears in a Chapter 13. The biggest problem that we see with individuals wanting to keep their car is if they have a car that has a lot of equity in it. As we will talk about in the next segment, the exemptions that one receives in Florida, especially if you are claiming a homestead exemption are very limited, and for a car you only get to keep a $1,000.00 worth of equity in a vehicle. So if you have a car that is paid off and worth $7,000.00 and you only get a credit of $1,000.00 worth of exemptions, you have a $6,000.00 asset that would need to be addressed. More often than not, even if you qualify for a Chapter 7, you would have to buy that car back and if you have to pay back $6,000.00 in equity, you would most likely have to file a Chapter 13 and spread those payments out over 60 months for about $100.00 a month. Unfortunately, most people need their vehicle to continue to work so while someone may qualify for a Chapter 7, they may have to file a Chapter 13.
3. Do I have to pay a percentage of what I owe back to my creditors?: The most common misconception with bankruptcy is that it does not matter how much you owe with regard to what you have to pay back. The issue is what is the value of what you are keeping. For example, If you have $30,000.00 worth of credit card debt and $10,000.00 worth of medical bills and are $50,000.00 upside down on your mortgage, but you only have $10,000.00 worth of non-exempt assets, you will only have to pay back $10,000.00. It does not matter what you owe, it is what you are keeping and/or what your disposable income is and again, your disposable income is what is left over at the end of the month after deduction of allowable expenses. These two items determine what, if anything, you must pay back to your creditors.
4. Will I lose everything?: The answer is no. What I will talk about here in a little bit more detail is the property that you get to exempt or keep. The best exemption we have here in Florida is the homestead exemption. It exempts your home and any equity that you have in it. However, if you are claiming the homestead exemption, your other exemptions are very limited. You get a $1,000.00 towards personal property and personal property is basically everything that is not real estate. So your clothes, furniture, jewelry, cash, stock and bonds, interest in a business, boats, golf clubs, fishing poles, cd’s, are the types of things that fall under the $1,000 personal property exemption. You also get a $1,000.00 exemption toward equity in a vehicle. That is it. About $2,000.00 when you are keeping your home. If you are a couple, that would go up to $4,000.00 ($2,000.00 each). If you are not keeping your home, well then you get an additional exemption of $4,000.00 toward personal property and that also can be used toward exempting some of the equity you may have in a vehicle. So if you are a couple and you are not claiming a homestead exemption, you basically get to keep $12,000.00 worth of your personal belongings and assets. Other exemptions include a 401-K or an IRA, worker compensation benefits, are exempt generally and there may be some other unique exemptions depending upon what your situation is and the type of asset.
Now, one thing to also keep in mind especially here in Florida where we have a number of people who have relocated, the generally rule under the Bankruptcy Code is that you may only claim the Florida exemptions if you have lived in Florida for two years. If you have lived here for less than two years, then you have to claim the exemptions from the state where you came from unless that state does not allow their exemptions to be applied to non-residents. In that case, you then have to use the Federal exemptions. It gets quite complicated and is beyond the scope of this Chapter but I did want to mention it to you since there are a number of new residents here in Florida who may not qualify for Florida exemptions.
5. Will someone come to my home and search my house?: The answer is that in a small percentage of cases, the Trustee may hire an appraiser to come and appraise your personal property. One way to avoid that is to have your own appraisal done prior to filing. Again, the burden is on you as the debtor to prove the value of your assets. If you do prove the value by providing the Trustee with an appraisal done by a licensed and recognized appraiser, whether it is for your personal property or your vehicle, generally the Trustee will accept that appraisal and allow you to use the value that you have placed on your bankruptcy schedules. The advantage of having appraisals done prior to filing is that it takes the uncertainty out of the valuation process and reduces the stress of filing and the creditor’s meeting.
Contact Our Bankruptcy Attorneys
These are the top five most frequently asked bankruptcy questions that we receive. Again, there are many more bankruptcy questions, you can find some additional ones on our website and we will of course, be happy to answer all of your questions if you choose to meet with us. Contact our Bankruptcy Office today to schedule a free bankruptcy consultation.