questions from clients


What is bankruptcy and what does it do?

  Bankruptcy is a legal process that prevents creditors from collecting debts. It is intended to provide honest debtors with a way out of debt they cannot repay and to provide a fresh start. Bankruptcy filings stop foreclosure lawsuits, collection lawsuits, foreclosure sales, sheriff sales, repossessions or garnishments, post-judgment collection proceedings, harassing phone calls or letters, and can even save a home in foreclosure.   

What does it cost?

 Attorney's fees for a Chapter 7 bankruptcy will vary between $1,000 and $1,500. Fees for a Chapter 13 bankruptcy will vary between $2500 and $4,500. In addition to attorney's fees,  the filer must pay a filing fee. At this time the filing fee for a Chapter 7 bankruptcy is $335 and $310 for a Chapter 13.     

Are all my debts discharged or canceled?

  No, not necessarily. If you intend to keep property you are making payments on; for instance, your car or house, you must continue to make the payments. Also, certain debts are not dischargeable, for instance, child support, alimony, and for all practical purposes, student loans. Income taxes can only be discharged in certain circumstances. Some taxes cannot be discharged at all. Also, some debts that can be discharged in a Chapter 13 cannot be discharged in a Chapter 7. However, credit card bills, judgments, deficiency claims, medical bills, and unpaid personal loans can all be discharged.  

What can I keep?

  Chapter 13 filers can keep all their property including houses and cars no matter how valuable. Chapter 7 filers can keep only their exempt property, all the rest (non-exempt property) must be repurchased by the debtor or turned over to a bankruptcy trustee to be sold.  Exemptions are different for people who wish to keep their homes, and those that do not, or for those who may own a mobile home. If you claim your home as exempt, you are limited to an additional exemption of up to $1,000 on any personal property, and up to $1,000 of value in a car. If you do not claim a home as exempt, or you own a mobile home, you may keep up to $5,000 worth of personal property and an additional $1,000 value in a car. Each spouse is entitled to each of these exemptions in a joint filing. Finally, all filers may keep their IRAs, 401(k)s, or other pension or retirement plan. There are other exemptions but they are beyond the scope of this discussion.   

How can I keep property worth more than this?

You can keep all your property in a Chapter 13 bankruptcy, no matter how much it is worth. Instead the trustee receives monthly payments from you. This is one of the advantages of Chapter 13 filing. In a Chapter 7, if you wish to keep your non-exempt property, you must repurchase it from the Chapter 7 trustee. Generally, he or she will give you up to one year to do so. If you choose not to repurchase it, the property is sold by the trustee. In all cases the proceeds are distributed to your creditors.   

What are the differences between Chapter 7 and Chapter 13 bankruptcies? Which is best for me?

Briefly, a Chapter 7 bankruptcy is a liquidation bankruptcy in which the debtor’s non-exempt assets are 

sold, the proceeds distributed to creditors, and a discharge granted. A Chapter 13 bankruptcy is a debt 

adjustment process in which the debtor keeps all of his or her assets and instead makes monthly payments to the bankruptcy trustee for at least 36 but no more than 60 months before a discharge is granted.

 A Chapter 13 filer almost always pays less than the total owed.

  • You should file a Chapter 7 bankruptcy if: 
  • You have no non-exempt assets that you wish to keep. 
  • You have non-exempt assets you wish to keep and you can repurchase in 12 months. 
  • You wish to keep your house or car and are current on the payments. 
  • Your household income is less than the median income for same size households. 
  • Your household income is over the median income for same size household and you can rebut a presumption of abuse.     
  • You should file a Chapter 13 bankruptcy if: 
  • Your household income is over the median income for same size household and you cannot rebut a presumption of abuse. 
  • You have non-exempt assets you wish to keep but cannot re-purchase in 12 months. 
  • You are behind in car or house payments and wish to keep these assets and bring payments current. 
  • You wish to modify a mortgage or seek lower car payments. 
  • You may wish to dismiss the bankruptcy at a later time.   

A Chapter 7 bankruptcy is usually quicker, easier and cheaper than a Chapter 13 bankruptcy, and for that reason is preferred by most filers. On the other hand, you can dismiss a Chapter 13 and cure or modify past due mortgage or car payments. Finally, you can convert between Chapters at least one time without any problem.

For More Frequently asked Questions from Clients in Cape Coral,  Fort Myers, and Lehigh Acres Call (239) 334-7107.


Do I need a lawyer?

  Yes, consider this quote taken from the Bankruptcy Court’s website: 

“Each Debtor filing an individual bankruptcy has a right to represent him or herself (Pro Se Debtor); however, the use of an attorney is recommended. Ignorance of the law may cost an individual far more than an attorney's fee…. Note: Individuals who choose to represent themselves will not be able to obtain legal advice from court personnel or from the trustee appointed to their case.”

 (Frequently asked questions ‘Do I need an attorney?’)  

What gets filed, where, and how?

 Filings occur electronically, with the Bankruptcy court in Tampa. You must file a petition and schedules, statement of financial affairs, as well as a statement of intentions or Chapter 13 bankruptcy plan. Your schedules disclose to the bankruptcy court all your assets, all your liabilities (debts), your income and expenses, as well as codebtors or others who may be affected by your filing. The statement of affairs provides disclosure of income and transfers of your property before the bankruptcy filing. All this is under oath, the bankruptcy court is very strict, disclosures must be truthful and complete. These schedules and statements are prepared by your attorney from information provided by you. You will also need to provide copies of current pay stubs or advises, copies of bank statements and income tax returns (for those who are required to file them). If income is from self-employment, a profit and loss statement or other information concerning monthly income and expenses will be required.  

What happens?

 Several things, but the most important to the filer is the issuance of a court order (called the automatic stay) to all creditors listed in the filing. This stay prevents creditors from collecting money from the debtor. It is how the court prevents seizures of the debtor’s property or unauthorized contact by creditors after the filing. The court then appoints a person called the Trustee who is responsible to inquire into the debtor’s filing and be certain all pertinent matters have been properly disclosed, and where required, to collect, report, and distribute for the benefit of the creditors, any funds received from the debtor or from the sale of the debtor’s property. A meeting is scheduled, called a 341 meeting, at which the debtor is placed under oath and questioned regarding matters in the filing (i.e. Debtor’s petition and schedules). The trustee will require certain materials be produced prior to the meeting. These generally include things like pay stubs, tax returns, and bank statements. In practice, the trustee can demand whether he or she thinks is needed to properly administer the bankruptcy estate. If a debtor does not comply, he or she may not receive a discharge. For most people, this creditor’s meeting is as close as you will come to a courtroom. In Chapter 7 bankruptcies, the trustee will contact the attorney after the meeting if there are any issues including the turnover or repurchase of non-exempt property. After the meeting, there is a 60-day waiting period for creditors to file objections. Discharges are usually granted about 3 to 4 months after a Chapter 7 filing. For Chapter 13 filers, there is usually a 6 month to 1 year period before the plan is confirmed by the court, and although this is important to the debtor, his or her appearance in court is generally not required. Once the Chapter 13 plan is confirmed, the debtor need only continue to make the monthly payments and comply with the other terms of the plan. A Chapter 13 discharge is not granted until after completion of the plan.   

Bankruptcy, Credit Reports and Credit Scores.

 First, you should know that negative information can stay on your credit report for quite some time. For instance, collection accounts, foreclosures, short sales, deeds in lieu of foreclosure, and late payments may be reported for up to 7 years. Unpaid judgments and tax liens may remain indefinitely (although most credit agencies remove the judgments after 10 years and tax liens may be removed under the IRS Fresh Start program). Bankruptcies are no exception: Chapter 7 filings can remain up to 10 years and 13s up to 7 years from the filing dates.  The good news is that with the passage of time, the impact diminishes. Also, if you have recently received a bankruptcy discharge, you are now debt free (other than debts associated with property you decided to keep and non-dischargeable debts). This, and because you cannot file another bankruptcy for up to 8 years, makes you attractive to some lenders. Interest rates and other terms will be onerous but credit is available. Probably the best way to establish credit after bankruptcy is to use a mix of credit cards and installment debt (car loans or similar purchase money obligations) and always being punctual with your payments. Establishing good credit after bankruptcy is not much different than establishing credit before the bankruptcy. That is, by spending less than you earn, accumulating savings, making all payments when due, and by staying well within your credit limits.    



I just moved to Florida from another State. Can I still file bankruptcy in Florida?

 If you have lived in Florida for less than 6 months, you must file your bankruptcy in the State you moved from. If you have lived in Florida more than 6 months, but less than 2 years, you can file a bankruptcy in Florida, but you must use the law of the State you moved from to determine what property is exempt. This can be a bit tricky and you are strongly advised to consult with a lawyer before filing, especially if you wish to claim a home as exempt. After 2 years you may file in Florida and use Florida’s exemptions. 

Does bankruptcy discharge unpaid income taxes?

Bankruptcy can discharge unsecured income tax debt if:

  • A tax return was filed more than two years before the bankruptcy filing.
  • A tax return was due more than three years before the bankruptcy filing. 
  • The taxes were assessed more than 240 days before the bankruptcy filing. 

Any unpaid income tax not meeting these requirements is a considered a priority debt. It is not discharged in a Chapter 7 and must be paid in a Chapter 13.

Strictly speaking, in order to obtain a discharge for taxes, you need to file a separate adversary proceeding naming the IRS as a party. However, as a practical matter, this might not be necessary or useful in all cases. 

Finally, be aware, that if a tax lien has been filed, the bankruptcy discharge does not cancel the lien. The IRS must be contacted and must agree to its release. 

What is the ‘means test’ and why is it important?

Effective October 2005 Congress enacted major changes in the bankruptcy code. The chief among these was the concept of means testing in bankruptcy.  The idea behind it was that if a filer had income sufficient to pay a significant portion of his or her debt, that filer should be required to file a Chapter 13 bankruptcy and complete a 5-year Chapter 13 payment plan. The test is two pronged, the first involves the calculation of the debtor’s annual income. This is done by breaking down the debtor’s monthly income from all sources (excluding social security) for the 6 months prior to filing and then doubling it. This figure represents the debtor’s annual income and is then compared with the Census Bureau Median Family Income by Family Size. If the debtor’s annual income is below the median figure, that filer is eligible for the Chapter 7 (liquidation bankruptcy), if not the second part of the test applies, and the court will then examine that filer’s particular circumstances and calculate that debtor’s Monthly Disposable Income (MDI). If the debtor’s MDI is below approximately $125.00, then a Chapter 7 filing is available, if MDI exceeds $214.00, it is not. (Both figures are as of January 2019). If MDI is between those amounts, then multiply the MDI times 60. If that amount exceeds 25% of the total debt, a Chapter 13 must be filed. If not, the debtor is eligible for a Chapter 7.

What could possibly be easier?

Visual representations might be easier to follow and  can be found on the internet using the search term                   ‘ means test flow chart ’ 

Recent Census Bureau Median Family Income by Family Size can be found at the FIND OUT MORE button below 

Find out more

Still have questions? Please call me 239-334-7107

What does bankruptcy cost how does bankruptcy  work do I need a lawyer to file bankruptcy  recently moved to Florida discharge income taxes  Bankruptcy FAQ Frequently asked Questions in Fort Myers, Cape Coral and Lehigh Acres call 239-334-7107