Chapter 7 Bankruptcy

Published on: June 4, 2017

How Important is it to Complete Bankruptcy Schedules and Statement of Financial Affairs Accurately?

It is very important to correctly reflect the assets of your bankruptcy estate and your intentions as well as meet all the other requirements to properly file a bankruptcy. Documents that appear thorough, accurate and complete when filed, tend to receive far less scrutiny. When in doubt, disclose, disclose and disclose. If the bankruptcy trustee believes a debtor, or even worse, debtor’s counsel, has not fully and truthfully disclosed all of the requested information, that trustee will question the debtor endlessly, and will also request documents from the debtor to prove the information in the petition. It’s important to hire competent and experienced bankruptcy counsel who has a good relationship of trust with the Chapter 7 and 13 trustees for this reason. Proper preparation of a bankruptcy petition is one of the most important things a debtor and debtor’s counsel can do:

It ensures a quick and smooth 341 examination;
The more complete the documentation is, the less questions a trustee needs to ask;

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Published on: May 30, 2017

Bankruptcy and Child Support Obligations

By Christie D. Arkovich, P.A.

According to the US Census Bureau, and their latest full year of researched data on child support payments (2007), of the $34 billion dollars in child support that was owed, nearly 62% of it was reported as received by the end of the year. What does that tell us? Well, it means that the United States Family Court system puts an extremely high priority and value on a parent’s child support obligation. This is a good thing, but if you believe that bankruptcy absolves your child support obligations, then this might be a sobering moment for you. Let me explain what happens with child support during bankruptcy.

Domestic Support Obligation

Child support is classified as a Domestic Support Obligation (DSO), and is therefore not protected under the umbrella of bankruptcy; it is referred to as a non-dischargeable debt. This applies to past, present, and future support payments. In addition, the “automatic stay” technique cannot halt or delay the collection efforts of DSOs. Nationally, you will find the same regulations, even though different jurisdictions have their own terminology for it.

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Published on: May 22, 2017

Consumer Bankruptcy and Tax Debt – How to Discharge your Federal Tax Debt

By Christie D. Arkovich, P.A.

Bankruptcy enables you to write off income taxes more than three-years old. However, bankruptcy cannot get rid of all back taxes. There are many qualifications and stipulations regarding what taxes you can and cannot write off under bankruptcy. Our Florida bankruptcy clients are often able to discharge more taxes than they previously thought – see our website or contact us for a free consultation.

Federal and State

Because there are two different types of income tax: state and federal. The specific bankruptcy guidelines between state and the federal government vary as well.

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Published on: May 17, 2017

Do Married Couples Have to File Bankruptcy Together?

By Christie D. Arkovich, P.A.

The bankruptcy laws do not require married couples to file bankruptcy together. This is one of those things that people do because they just assume they have no choice, and you can bet that one, two, or five knowledgeable people (none of them bankruptcy lawyers) told them they absolutely had to file jointly. If you are going to declare bankruptcy, and you are married, then several circumstances dictate the outcome of your filing.

When One Spouse Has Much Better Credit Than the Other

Credit ratings are as unique as fingerprints, so the odds are good that either you or your spouse will have a better credit rating. If the difference is quite a bit, then it might be a good idea to file the bankruptcy under that person’s name only. However, you can only write off debts under that bankruptcy if the debt account is under that person’s name individually or jointly. So, just for example, if your spouse has old medical bills (in their name only, from before you married them) that would be eligible for discharge under a bankruptcy, the only way to write those debts off is for either them to file bankruptcy alone or jointly with you. Therefore, you alone cannot write those debts off, because your name is not connected to them in any way. In most cases that I handle, married couples file together, simply because the majority of their debts are jointly held, and thus they want to fix both of their credit ratings and protect their jointly held assets.

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Published on: May 15, 2017

Dispelling the Myth of Losing Everything by Declaring Bankruptcy

By Christie D. Arkovich, P.A.

Personal Property

Bankruptcy is a way for you to actually keep most of your personal assets and say goodbye to the creditors and debt collectors. The truth is that debt collectors cannot touch MANY of your assets when you declare bankruptcy, most are protected. The magic of this protection is exemption. Yes, some assets are exempt from seizure under the protection of the local bankruptcy laws. Now, the keyword in that last sentence was “local”. The bankruptcy exemption laws differ from jurisdiction to jurisdiction, so that means an asset exempt in Dallas might not be in New York; it all depends on the local laws. Sound complicated? Well, it can be, but that is even more reason to retain a law firm that specializes in your local bankruptcy laws. In Florida, the state law exemptions can be found in Florida Statutes Section 222. However, if you have moved to Florida within the past two years, you may instead be governed by the State you moved from or the federal exemptions. It is important to use the correct exemptions or you could waive your right to keep your personal property, vehicles or even your home. To understand the exemption process, it helps to know what type of debt you have. In bankruptcy, there are two types of debt: secured and unsecured.

Secured Debt

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Published on: October 6, 2016

Florida as a Bankruptcy Debtors’ Haven? Not Always… What it Means to Surrender a Home in Bankruptcy.

By Christie D. Arkovich, P.A.

Florida has a history of being unusually lenient when it comes to debtor protections in bankruptcy. For one, we’ve opted out of the federal exemptions and have our own. The homestead protections are some of the best in the country. In some ways Florida’s exemptions are good, in others they are outdated. For instance if a debtor owns a home they are allowed only $1,000 in personal property exemptions (plus other retirement account and homestead exemptions etc). A middle class family filing bankruptcy when they are overwhelmed with bills, have personal belongings that total more than $1,000 particularly when they own a home. This amount is outdated and not reflective of the times.

A recent switcharoo regarding a debtor’s homestead has caught many debtors unaware. For the past several years, many debtors’ attorneys advised their clients to waive their homestead rights and instead select an option on their Statement of Financial Affairs (“SOFA”) to “surrender” their home even though they continued to live there. Some of those clients wanted to defend a pending foreclosure or obtain a loan modification. Some ran into trouble years later and then wanted to defend a foreclosure. Perhaps a client ran into a mortgage loan servicer with poor recording skills that failed to correctly apply their payments and had to defend a foreclosure that should never have taken place. Selecting “surrender” on the SOFA can have long reaching consequences because it can forever bar a client from challenging a foreclosure even years after the fact due to a new interpretation of what the term “surrender” should mean.

On October 4, 2016, the Eleventh Circuit Court of Appeals ruled that chapter 7 debtors who file a statement of intention to surrender real property in bankruptcy cannot later contest a foreclosure action, and bankruptcy courts have broad power and authority to sanction violations. Failla v. CitiBank, N.A., case no. 15-15626 (11th Cir. October 4, 2016). While Failla is a Chapter 7 case, there is a strong probability it will be argued in a Chapter 13 as well.

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Published on: August 10, 2016

Taxes and Bankruptcy – Two Not so Fun Topics

By Christie D. Arkovich, P.A.

The Golden Rules to Discharge Taxes:

If you choose to file a Chapter 7 bankruptcy, your tax debt could be discharged if you meet the following tests:

The taxes must be for income.

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Published on: August 4, 2016

Business Debt Dragging You Down, Consider Bankruptcy Options for a Fresh Start.

By Christie D. Arkovich, P.A.

Many of our recent bankruptcy clients report large amounts of business debt. This may be small business loans, credit cards run up to support a small business, or personal guarantees. Often the business is gone at this point and we are looking to file an individual bankruptcy. Filing a bankruptcy for a dissolved business is often an unnecessary and risky expense.

Sometimes our debtor client is married, and their spouse remains unaffected by the bankruptcy. Their marriage alone often provides the basis to protect their personal or real property by using a special exemption called Tenancy by the Entireties. In Florida, our homestead laws are quite broad and serve to protect the home. Most IRAs, SEP IRAs, 401ks and other retirement assets are fully protected as well. If the amount of business debt exceeds the consumer household related debt, our clients do not even have to comply with the rather stringent Means Test imposed by Congress in the bankruptcy reform act passed a few years back.

Business creditors are also often some of the most aggressive. They figure if you once made money, you will again one day. So they sue and obtain a judgment. But if you file bankruptcy at a low point in your life, you truly can start over. You can file bankruptcy whether or not the creditor has already obtained a judgment. It’s discharged all the same.

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Published on: July 23, 2016

How to Become Debt Free by the Holidays?

By Christie D. Arkovich, P.A.

Do you realize that if you are constantly robbing Peter to pay Paul and cannot ever get ahead, you could be debt free by the holidays if you qualify for a Chapter 7. Many clients who come to see us have been struggling with debt for a long long time. No one rushes to file bankruptcy. Most everyone tries to pay their bills until they finally can’t.

But a Chapter 7 case takes less time start to finish than traffic court in many cases. Of course there are exceptions. But ordinarily a Chapter 7 discharge takes approximately 90 days.

There are some instances where it could take longer: the bankruptcy trustee needs more information, you’ve delayed the personal financial management course, you are trying to discharge student loans, a creditor or the trustee objects or disagrees with your exemptions. Hiring competent bankruptcy counsel will make everything go much smoother.

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Published on: July 18, 2016

Can I Buy, Sell or Trade in My Car Before Filing Bankruptcy?

By Christie D. Arkovich, P.A.

This can be a sticky wicket. I’ve never actually used that word in a sentence. 🙂 Normally you can buy a car before filing bankruptcy. In fact, in some cases it can be a good idea (note: as a bankruptcy attorney I am not supposed to tell our clients to buy cars before filing). But you should know that if you do pull the trigger to buy a car before filing you often can get a better interest rate or other financing terms than if you are actually in a bankruptcy. You still have to pay to keep it of course. But you’ll have a better idea of what your budget will be when you actually file for bankruptcy. It’s a bad idea to have too high of a monthly payment also, so keep it within a sustainable amount. Getting a replacement vehicle before you file can also be a good idea because then any future repairs will be covered by a warranty. Once you are in bankruptcy, you likely won’t have extra money sitting around to fix a broken transmission, and would have to file motions to replace the car or obtain a short term stay of your plan payments if a Chapter 13.

What about selling your car before filing? Also a sticky wicket. That’s twice now, I’m on a roll. If you are selling for fair market value to a third party, all is good. If you are giving your friend or family member the deal of a century that is an incredibly bad idea however. The trustee can go get the car back and sell it at its real value for the benefit of your creditors. It is best to keep a record of the transaction and deposit the funds in your bank account so the bankruptcy Trustee can see that the money actually was paid and where the money went.

So, what about trading in a vehicle? Well, that also is not as black and white as you might think. I’m done with the wicket thing. If you are trading in a vehicle with a good amount of equity (maybe even free and clear) and you soon afterwards file a Chapter 7, the Trustee might not be too happy about it. You see, to them, you’ve now liened up an asset that may have been over your exemptions. They would have wanted to sell that free and clear vehicle to bring money into the bankruptcy estate. Particularly if you don’t have any exemptions left to cover the equity in the vehicle. But if the vehicle had a large lien on it and you’ve merely switched to another vehicle they likely won’t care. If you are in a Chapter 13, it likely won’t make a bit of difference. But be careful if you are filing Chapter 7 and make sure to obtain the advice of a good bankruptcy attorney before trading in your vehicle if it has equity.

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