Bankruptcy is a powerful legal process established under federal law to restructure, reorganize or discharge your debts. Bankruptcy can be effective at eliminating unsecured debt (credit cards, medical bills, and deficiency judgments) and, in certain instances, can remove junior mortgages from your property (home equity loans). Bankruptcy can stop foreclosures, cease creditor harassment, and usually will cancel wage garnishments and bank levies. At Smith & Dine, P.A., we have filed hundreds of bankruptcies for our clients. Please contact us to schedule your free bankruptcy consultation to evaluate your needs.
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Chapter 7
Summary: This type of bankruptcy is available to individuals and businesses, and is called a "liquidation case." Under Chapter 7 in Florida, individuals are permitted to retain certain exempt property, such as retirement accounts and homestead properties. The remaining non-exmept property is "liquidated" to pay creditors. Liquidation occurs when a court-appointed trustee sells the property at auction, or more commonly, sells the property back to the debtor who filed the case.
Pros: These are less expensive, faster cases. There is no debt limit. No long-term payment plans.
Cons: They are often "means tested," meaning that this case type is not available to high earners. Can be difficult to keep non-exempt personal propery, such as paid-off vehicles or expensive jewelry. Does not permit the removal of junior liens on real property. Does not stop foreclosure.
Application: These cases are typically well suited for individuals with low to moderate income, or the recently unemployed, with high levels of credit card debt and/or medical bills. They also work well for people facing a foreclosure who do NOT want to keep the home.
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Chapter 13
Summary: This type of bankruptcy is available to individuals only, and is called a "wage earner case." Under Chapter 13 in Florida, individuals typically keep all of their property (that they want to keep), and pay back some or all of their debts over a 3 to 5 year period. The Debtor files a plan with the Court to repay the debt in monthly installments. The case is administered by a court-appointed trustee.
Pros: Allowed to keep non-exempt assets in most cases. Can stop foreclosure, and can eliminate certain second mortgages (home equity loans) if the house is worth less than the first mortgage balance. Can restructure car loans to lower interest rate, and in some cases, can lower principal balance on older car loans.
Cons: There are debt limits. Requires regular income. More expensive, and repayment period over multiple years.
Application: These cases are typically well suited for individuals in the middle to upper-middle income range. They work well for homeowners who have multiple mortgages and a home that is severely upside-down in value. They are very effective in stopping foreclosures, and allow the homeowner several years to "catch up" on their mortgage arrearage.
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Chapter 11
Summary: Chapter 11 can be filed by individuals or businesses and offers a flexible approach to restructuring debt. This type of case permits the Debtor to retain control of its property while reorganizing debts in an attempt to maximize value to the creditors. Creditors are often represented by committee and are given the opportunity to approve or reject the restructuring via a vote.
Pros: Very flexible. No debt limits, no income requirements. Usually the debtor will retain the property as debtor-in-possession.
Cons: Expensive and complicated. Requires a significant commitment of time from the attorney and the debtor.
Application: These are suitable for any business that seeks to continue operations. These are also suitable for individuals in the middle to upper income range that do not qualify for a Chapter 7 or 13 because of ineligibility due to excessive income or excessive assets/liabilities. Barring an emergency situation, these cases require substantial preparation prior to filing.
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Bankruptcy Fee/Cost List:
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| Chapter 7: |
Attorney Fee: |
$1,500 (basic) to $3,500 (complex) |
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Filing Fee: |
$299 |
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Costs: |
$201 |
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| Chapter 13: |
Attorney Fee: |
$3,000 to $3,600 |
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Filing Fee: |
$274 |
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Financed Amt: |
up to $1,000 of Atty Fee paid via plan |
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| Chapter 11: |
Attorney Fee: |
$15,000+ (varies by time charged) |
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Filing Fee: |
$1,039 |
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Costs: |
varies |
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Bankruptcy Resources
Video on bankruptcy basics from the Middle District of Florida: Click Here
Videos on multiple bankruptcy issues for the consumer from the US Courts website: Click Here
Means Test (Form 22A) for determining eligibility for Chapter 7 filers (pdf document): Click Here for Form
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"Where there is Hunger, Law is not regarded;
and where Law is not regarded, there will be Hunger."
-Benjamin Franklin, Poor Richard's Almanack, 1755
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