Bankruptcy Frequently Asked Questions

Most debtors who file bankruptcy, and many of their creditors, know very little about the bankruptcy process. The following is designed to assist the general public by providing basic answers to some of the most commonly asked questions. For additional information, please view the Courts General Information.

What is Bankruptcy?

Bankruptcy is a legal process which allows a person (a Debtor), who owes more money than he or she can currently repay, to either (1) repay a portion of the money over time under Chapter 11, 12, or 13, or (2) have the entire debt forgiven (discharged) under chapter 7. Under chapter 7, a Debtor may be required to surrender assets to a trustee. Bankruptcy is also available to businesses, corporations, and partnerships. Even municipal governments can file bankruptcy (under Chapter 9).

After a Debtor has filed a case (i.e., petition), creditors must stop all collection efforts against the Debtor for a period of time, unless they get permission from the bankruptcy court to continue. This protection from collection efforts is referred to as the automatic stay.

The Bankruptcy Code and Federal Rules of Bankruptcy Procedure determine which chapter one is eligible to file, which debts can be eliminated, how long repayment must continue, which possessions can be kept, etc. A Debtor must abide by these federal laws and rules.

What is the Bankruptcy Code?

The Bankruptcy Code refers to Title 11 of the United States Code (11 U.S.C. sections 101-1330).

What is the difference between a chapter 7, 13 and 11?

In a Chapter 7, Debtors are permitted to retain certain exempt property, while the remaining assets are liquidated by the trustee. The trustee will distribute the funds from the liquidation to holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Accordingly, potential Debtors should realize that the filing of a petition under chapter 7 might result in the loss of non-exempt property. In most instances, Debtors assets are exempt and they are not required to turnover  anything to the trustee. Assets like pension plan, IRA's, 401K's etc are  exempt and that every Debtor is entitled to a cetain amount of property.

Chapter 13 is designed for individuals with regular income to repay a portion or all of their debt over an extended period of time. Chapter 13 may be appropriate for Debtors who seek to retain certain assets through a repayment plan.

Chapter 11 allows corporations, partnerships, and certain individuals who do not qualify under Chapter 13, to reorganize without having to liquidate all assets. As in a Chapter 13, the Debtor (called the debtor-in-possession because a trustee is not normally assigned) is required to present a repayment plan. If the plan is accepted by the creditors and subsequently approved (confirmed) by the Court, this allows the Debtor to reorganize his/her/or its personal, financial, or business affairs.

How is a debt classified as secured, unsecured, priority, or administrative?

A secured debt is a debt that is collateralized by property. A creditor whose debt is secured has a right to foreclose or take property to satisfy a secured debt. For example, a mortgage loan is likely secured by a Debtors home. This means that the lender has the right to foreclose upon and take the home if the Debtor fails to make the loan payments.

An unsecured debt arises when you promise to repay someone a sum of money at a particular time, but you have not pledged any property as collateral for the debt.

A priority debt is a debt entitled to priority in payment, ahead of other debts. Please refer to 11 U.S.C. 507 of the Bankruptcy Code for a listing of such priority claims.

An administrative debt is a category of priority debt. Generally, it is created when someone provides goods or services to your bankruptcy estate after you file your petition. An example of an administrative debt is the fee charged by an attorney or other authorized professional for services rendered after the bankruptcy case has been filed.

What debts are dischargeable?

Generally, all debts listed on the petition are dischargeable. However, certain types of debt listed in 11 U.S.C. 523 are not dischargeable. The non-dischargeable debts listed in 523 include, but are not limited to:

  1. Certain taxes and fines;
  2. Debts arising from certain fraudulent conduct;
  3. Debts not listed in your bankruptcy petition;
  4. Alimony, child maintenance or support, and certain other related debts arising out of a divorce decree or separation agreement;
  5. Debts caused by the Debtors willful and malicious injury to another;
  6. Government guaranteed student loans;
  7. Debts caused by a death or personal injury related to your operation of a motor vehicle while intoxicated;
  8. Post-bankruptcy condominium or cooperative owners association fees.

This list includes only examples of non-dischargeable debts; see 11 U.S.C. 523 for a complete list. Under 523, a creditor or party in interest may also file a complaint to have their debt declared nondischargeable.

In a chapter 13 case, the discharge is broader under 11 U.S.C. 1328(a).

Can a discharge be denied?

Under certain circumstances, 11 U.S.C. 727 provides the Debtors discharge may be denied in a chapter 7 case. Grounds for denial exist when the Debtor: (1) failed to keep or produce adequate books or financial records, (2) failed to satisfactorily explain any loss of assets, (3) committed a bankruptcy crime such as perjury, (4) failed to obey a lawful order of the bankruptcy court, or (5) fraudulently transferred, concealed, or destroyed property that would have become property of the estate. Refer to 727 for a complete list.

What is the difference between a discharge being denied and a debt being declared nondischargeable?

The court can deny the Debtors discharge of all debts, or determine that a particular debt or debts are nondischargeable. If the court denies the discharge of all debts, then the Debtor will still be legally responsible for all the debts as if no bankruptcy petition had ever been filed. If only certain debts are ruled nondischargeable, the Debtor will still receive a discharge order. However, the Debtor will remain legally responsible for those nondischargeable debts. For a discharge to be denied, either as to a particular debt or as to all debts, someone must file an adversary proceeding (lawsuit) with the court. That party must then prove one of the grounds for denial of the discharge or for a debt to be declared nondischargeable. See Question No. 19 (for discharge) and Question No. 15 (for dischargeability of a particular debt). If your discharge is not withheld or none of your debts is declared to be nondischargeable, then all the debts listed in your petition will be discharged upon the entry of the order granting your discharge (meaning your personal liability for the debts will be eliminated).

What is the role of a Trustee assigned in a chapter 7 or 13 case?

Under Chapter 7, an impartial trustee is appointed to administer the case by collecting and liquidating the Debtors non-exempt assets in a manner that maximizes the return to the Debtors unsecured creditors.

Under Chapter 13, an impartial trustee is also appointed to administer the case. The primary roles of the chapter 13 trustee are to determine the feasibility of a Debtors repayment plan for the court and to serve as a disbursing agent, collecting payments from Debtors and making distributions to creditors.

What is the function of the U. S. Trustee?

The office of the U. S. Trustee is an agency of the Department of Justice, with responsibilities that include monitoring the administration of bankruptcy cases and detecting bankruptcy fraud. It is also responsible for appointing and supervising interim trustees to administer Chapter 7 cases, overseeing the Debtor-in-Possession, and appointing a standing Trustee in Chapter 13 cases.

What is a 341 meeting?

This meeting is referred to as the meeting of creditors. All creditors are notified so that they may attend, but their attendance is not required. Debtors have a duty to appear and testify under oath and answer questions by creditors. This meeting is presided over by the trustee assigned to the case and is held approximately 40 days after the petition is filed. Debtors are required to provide photo identification and proof of social security number to the assigned trustee. A Debtors failure to appear may result in dismissal of the case. If a continuance or change in the hearing date is sought, the trustee assigned to the case must be contacted.

If I file for bankruptcy, will it stop an eviction?

The Clerks Office is prohibited by federal statute from providing legal advice. Questions pertaining to how a bankruptcy filing affects enforcement of an eviction proceeding should be directed to a bankruptcy attorney.

How long does a bankruptcy filing remain on my credit report?

A maximum of ten years under provisions of the Fair Credit Reporting Act.

How do I get a bankruptcy filing removed from my credit report?

The Bankruptcy Court has no jurisdiction over credit reporting agencies. The Fair Credit Reporting Act, 6 U.S.C. 605, is the law that controls credit-reporting agencies. The law states that credit reporting agencies may not report a bankruptcy case on a persons credit report after ten years from the date the bankruptcy case is filed. You may contact the Federal Trade Commission, Bureau of Consumer Protection, Education Division, Washington, D.C. 20580; their phone number is (202) 326-2222. That agency can provide further information on reestablishing credit and addressing credit problems. You can also directly contact the credit bureau(s) reporting the information e.g., Equifax, Experian, TransUnion.

What can I do if a creditor keeps trying to collect money after I have filed bankruptcy?

You should immediately notify the creditor in writing that you have filed bankruptcy, and provide them with the case name, case number, and filing date, or a copy of the petition that shows it was filed. If a creditor continues to attempt to collect, the Debtor may be entitled to take legal action against the creditor to obtain a specific order from the court prohibiting the creditor from taking further collection action. However, a formal motion must be filed, in accordance with the Bankruptcy Code and applicable Rules. If the creditor is willfully violating the automatic stay, the Court can hold the creditor in contempt of court and fine the creditor. Any such legal action brought against the creditor will be complex and will normally dictate representation by a qualified bankruptcy attorney.

Susan D. Lasky, P.A.

915 Middle River Drive Suite 420
Ft. Lauderdale, Fl 33304
954-400-7474