Frequently Asked Questions About Debt and Bankruptcy

Anyone that is struggling to pay for ordinary and necessary living expenses for themselves, their family or business can benefit from filing bankruptcy.

The first step in the bankruptcy process is selecting a qualified attorney and providing them all relevant financial information. Next, the client will need to follow these steps.

1. Take a credit counseling class
2. Review and sign the bankruptcy petition
3. Attend the 341 meeting which is usually 30 days after the filing of the petition
4. Complete your second class
5. Request a reaffirmation for any vehicles from your attorney or car dealer
6. Receive your discharge in the mail

Note: For a chapter 13 the client will additionally attend a confirmation hearing and then receive an order confirming their chapter 13 plan.

Someone can file bankruptcy with the assistance of an attorney in any Federal Bankruptcy Court. The United States Southern District Bankruptcy Court has a few locations in and around Miami. Those include:

Bankruptcy Court Located in the C. Clyde Atkins US Courthouse
301 N Miami Ave #150, Miami, FL 33128

Fort Lauderdale US Bankruptcy Court
299 E Broward Blvd # 310, Fort Lauderdale, FL 33301

Palm Beach US Bankruptcy Court Clerk
701 Clematis St, West Palm Beach, FL 33401

Chapter 7 Bankruptcy is for individuals and businesses and provides a discharge of all unsecured debt and surrender of secured debt, without a repayment to creditors.

Chapter 13 Bankruptcy is for individuals only and allows a partial discharge of debt, and a repayment plan for secured and/or unsecured debt over a three (3) or five (5) year period.

Chapter 11 Bankruptcy is for individuals and businesses. It includes a reorganization of contractual obligations and repayment of secured and unsecured debt.

Chapter 12 Bankruptcy, which is exclusively for farmers and partial repayment of secured and unsecured debt.

An individual can include student debt in a Chapter 7 or Chapter 13 Bankruptcy. However, additional legal steps are required to prove that the debt is an undue hardship.

Learn more about student loan debt here.

No. You can maintain your home in a Chapter 7 as long as you are under the exemption amount for your state and in a Chapter 13 you can pay off your arrears to keep your home and force your mortgage company to accept your payments.

A Chapter 7 Bankruptcy case in which no assets are claimed typcially takes about 90 days.

For a Chapter 13 Bankruptcy case, the petition is typically resolved within 3 or 4 months.

Credit scores may increase slightly in as little as 30 days after discharge of your debts. In some cases, it may be possible to persue certain low-limit, high interest credit cards.

The reality is, a Chapter 13 Bankruptcy will stay on your credit for around 7 years. A Chapter 7 Bankruptcy is typically on your credit for 10 years.

Creditors are more favorable to individuals who have filed a Chapter 13, because this type of petition includes a debt repayment plan. How long it takes for your credit to significantly improve can be as little as a year, and up to 7 years, depending on your filing type, and a variety of other factors.

An individual should file bankruptcy in the following circumstances.

• To avoid foreclosure
• Pay off arrears on their home
• Avoid wage garnishments and other legal actions
• To discharge judgments from other courts
• Avoid excessive tax repayment schedules
• To maintain a business or to wind down a business
• To discharge student loans that are an undue hardship
• To get reprieve from credit card repayments at excessive interest rates
• To have a FRESH START.

Regardless of whether you file bankruptcy, always ensure that you answer a foreclosure complaint in State court to avoid a default judgement.

If you want to keep your home:

• Attempt a modification: Contact your loan servicer to apply for a modification.
• Ask if your servicers have a fast track modification program.
• You can also ask if you qualify for any of the Attorney General Settlements with your servicer.
• Another option is to request loan modification with the assistance of the bankruptcy court. In this case, file for a Chapter 13 and arrange a plan to repay the arrears that you owe to your bank without going through the modification process.

If you don’t want to keep your home:

• File a Chapter 7 or 13 bankruptcy to surrender your home and be released from the liability of the mortgage or any shortages from a short sale. You will also need a court to ensure a proper deed in lieu of foreclosure to work out abandonment of the property .

Many clients are not familiar with how extensive and protective the bankruptcy laws can be. Even after a client receives his or her discharge order, bankruptcy protection is in place. 

A quality bankruptcy attorney has to be versed in all matters of the bankruptcy court and bankruptcy litigation. This includes:

• Adversary proceedings
• Strip off of mortgages
• Cram down of cars
• Enforcing the automatic stay
• Enforcing the discharge injunction

In addition, an exceptional attorney will have a basic working knowledge of consumer laws, such as the Fair Credit Reporting Act and Fair Debt Collection Practice Laws.

The Law Office of Michelle Labayen, LLC makes sure that our clients are protected from collection actions by creditors. We ensure that they follow federal laws before, during and after the bankruptcy process.