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Bankruptcy

HOW BANKRUPTCY WORKS

Bankruptcy is a federal law that allows individuals and businesses to obtain relief from their debts. For consumers, there are two primary types of debt relief, Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. In Chapter 7, sometimes called “straight” or “liquidation” bankruptcy, all debts that are dischargeable (see FAQ’s below) go away quickly, usually in 3-4 months. Chapter 13 is a debt adjustment plan whereby people who can afford to, pay back a portion of their debts over 3-5 years.

Chapter 7 Bankruptcy

Most bankruptcy clients who are eligible choose to file Chapter 7 rather than Chapter 13, because it is quicker, simpler, and less expensive. But not everyone qualifies for Chapter 7. There are income limits. In addition, there are circumstances where people who have substantial equity in non-homestead real estate or personal property need to file Chapter 13 in order to be allowed to keep that property and still discharge their other debts through a payback plan.

Some Advantages of Chapter 13 Bankruptcy

There are some things that can be done in Chapter 13 that can’t be done in Chapter 7, such as removing certain eligible second mortgages on primary residences and restructuring non-homestead real estate mortgages, qualified vehicles and other personal property. This restructuring is called “cramdown” and “lien-stripping,” and the aim is to allow you to get rid of that portion of the debt that is not fully secured by collateral.

As you can see, the concept is pretty simple – but the devil can be in the details. Our firm is well qualified attorney to help guide you through the labyrinth of complex provisions and procedures.

To determine what you can do or should do, call or e-mail for an immediate appointment. The consultation is free:

Phone: 407-932-1115
Email: cblack@cliftonblack.com

Residential Mortgage Modification in Chapter 13

The Orlando Division of the United States Bankruptcy Court (M.D. Fla) has a one-of a kind mediation program for modification of residential mortgages in Chapter 13 Bankruptcy. The success rate in those Chapter 13 mediation modifications is outstanding, surpassing that achieved under state-sponsored mediation programs. Let me know if we can help you.

Business Bankruptcy

Yes, we do business bankruptcies as well. Whether you have a corporation, partnership, limited liability company, or are self-employed, debt relief is available for most businesses – either through liquidation under Chapter 7 Bankruptcy or reorganization under Chapter 11. Again, the consultation is free.

Representation of Creditors


We do represent creditors in contested matters to obtain motions for relief from the bankruptcy stay and adequate protection on secured claims, as well as adversarial proceedings to dismiss cases for abuse, or to obtain exceptions from bankruptcy discharge.

FREQUENTLY ASKED BANKRUPTCY QUESTIONS

Q: Can I file Chapter 7 Bankruptcy and keep my home?
A: Yes. Under Chapter 7, you can continue the payments and reaffirm your mortgage loan if you are current. However, even if you are behind in your payments and cannot afford to bring your home loan current, you have two options for keeping your home in a Chapter 13 Bankruptcy: a) you can attempt to modify your mortgage in a Chapter 13 mediation, and, if successful, your payments will be reduced, your arrearage (past due interest and fees) will generally be added to the principal, and that portion of the principal will usually not draw further interest; and in some cases, the principal may be reduced; b) even if you cannot modify your mortgage, you can repay the arrearage over time as part  of your Chapter 13 plan.

Q: What about my car? Can I keep it and file bankruptcy?
A: Generally, yes, but you may need to account for the value of your equity. You and your spouse are allowed a certain amount of exempt property. If you are over those exemptions, you may need to make payments of the amount of the non-exempt equity to your Chapter 7 Trustee, or file Chapter 13 and apply the value of that non-exempt equity to repay your unsecured creditors in your Chapter 13 plan.

Also, as in the case of your home, in Chapter 7 Bankruptcy, you must be current and stay current with your car payments; but in Chapter 13 Bankruptcy, you can, in some cases, “revalue” and reamortize your car loan down to the current fair market value, sometimes reducing the payments substantially. Redemption  of  an undersecured (upside down) car loan at current fair market value is another option, and there are lenders who may be able to help you do that, even in Chapter 7 Bankruptcy.

Q: Can a creditor garnish my wages or bank account?
A: Bankruptcy will immediately stop garnishments, foreclosures, lawsuits and collection calls.

Q: Will bankruptcy ruin my credit and for how long?
A: The bankruptcy filing information will stay on your credit report for seven years - but so will your foreclosure and other information regarding delinquencies or judgments. Bankruptcy will wipe the slate clean and the credit rating will start to improve immediately. Many clients tell us that they have become eligible for automobile and home loans after 2-3 years, sometimes less.

Q: Are all loans and debts dischargeable in bankruptcy?
A: Most are, however there are exceptions. Recent tax obligations, student loans, and obligations arising from a divorce settlement or judgment are generally non-dischargeable, as are many fraud claims and DUI-related damage claims.

Q: Can I strip my second mortgage in a Chapter 7
A: No, but you can do so in a Chapter 13, so long as you owe more on your first mortgage than your home is worth.

Q: If I surrender my house and/or car will I be liable for a deficiency judgment?
A: No, the debt will be discharged.

Q: My spouse and I are separated and are thinking about getting a divorce. Can either or both of us still file? Should we file now or wait until the divorce is over?
A: You can file bankruptcy together in the same case as long as you are still married, but you need not do so if you are separated and living apart. There may be advantages for filing together or for filing separately, depending on your circumstances.

Some important considerations are:

  • whether either of you are planning to keep the marital residence
  • whether the second mortgage can be stripped from the home
  • whether a mortgage modification is needed
  • how the debt obligations are distributed, and who is co-liable on which debt

It is important to know that most obligations arising under or in connection with a divorce case are non-dischargeable in bankruptcy.

Q: I recently moved here from another state. How long do I have to wait to file bankruptcy?
A: Generally you can file here after six (6) months.

Q: What if a person has to file bankruptcy again?
A: If a discharge has been received in a prior Chapter 7 Bankruptcy, a new Chapter 7 Bankruptcy case can only be filed after 8 years from the date of filing of  the prior Chapter 7 case. Chapter 13 cases can be filed more often.

Q: What is Chapter 11, and how does it work?
A: Chapter 11 provides for a reorganization of business debts through a plan. Generally the business can operate for several months as a “debtor-in-possession,” but eventually a plan must be proposed for the restructuring and/or reduction of your debts. The plan must be approved by your creditors unless the Court reviews the plan and determines that it is fair and equitable, and in the best interest of your creditors. Chapter 11 plans are very complex and you need competent legal counsel to even consider filing Chapter 11.

Call or email us. We can help.

Phone: 407-932-1115
Email: cblack@cliftonblack.com