West Palm Beach Bankruptcy Attorney
South Florida Bankruptcy Attorneys For Managing Debts, Assets, and Planning
Bankruptcy is a legal proceeding designed to help individuals and businesses eliminate their debts or to restructure and repay them under the protection of the Bankruptcy Court. Generally speaking, there are two types of bankruptcy—liquidation (Chapter 7) and reorganization (Chapters 11, 12 and 13). Both types of bankruptcy, liquidation and reorganization, have numerous rules and exceptions. Which Chapter is right for you is dependent upon your particular circumstances and objectives. As part of the services that we provide, the West Palm Beach bankruptcy attorneys of our firm listen closely to our clients and are sensitive to our clients’ needs and objectives while giving realistic advice as to the available options.
- Chapter 7 Bankruptcy
- Chapter 11 Bankruptcy
- Chapter 13 Bankruptcy
- Credit Card Debt
- Creditor Harassment
- Debt Settlement
- Medical Debt
- Non-Bankruptcy Workouts
- Personal Bankruptcy
- Student Loans
- Taxes & Bankruptcy
- Wage Garnishments
An experienced West Palm Beach bankruptcy attorney can be your first line of defense against financial reversals. Kelley Fulton Kaplan & Eller is a firm with extensive experience that enables clients to take control of their circumstances and forge a better financial future.
How Does Bankruptcy Work
Bankruptcy is a legal proceeding designed to help individuals and businesses eliminate their debts or to restructure and repay them under the protection of the Bankruptcy Court. Generally speaking, there are two types of bankruptcy—liquidation (Chapter 7) and reorganization (Chapters 11, 12 and 13). Both types of bankruptcy, liquidation and reorganization, have numerous rules and exceptions. Which Chapter is right for you is dependent upon your particular circumstances and objectives. As part of the services that we provide, the attorneys of our firm listen closely to our clients and are sensitive to our clients’ needs and objectives while giving realistic advice as to the available options.
Types of Bankruptcy
In a Chapter 7 liquidation proceeding, most of your debts are discharged. In exchange for the discharge of your debts, a trustee is assigned to liquidate your non-exempt assets. In Florida, the exemption laws are very broad and provide substantial protections to those in debt. At the time of your initial consultation, the attorneys of our firm will discuss the implications of applicable exemption laws.
Certain debts are not dischargeable in a Chapter 7 bankruptcy. If you want to keep property on which there is a lien, such as a house or car, you must continue to make these payments. Also, please note that only consumers who pass the means test can file a Chapter 7 bankruptcy (this test will be explained to you in detail by one of our attorneys at your initial meeting and a summary is discussed below).
A Chapter 13 bankruptcy is a three to five year repayment plan available only to individual consumers. Sometimes you must file a Chapter 13 bankruptcy in lieu of a Chapter 7 bankruptcy if you have enough income to repay your debts in a Chapter 13 plan, as determined by an objective evaluation called the “means test, as discussed below.
One fundamental advantage of a Chapter 13 bankruptcy is that, under certain circumstances, it can be used as a vehicle to remove an unsecured second mortgage from your home. The attorneys of our firm will discuss the viability of this feature of Chapter 13 bankruptcy to your individual circumstances at the time of your initial consultation.
You may not qualify for Chapter 13 bankruptcy if your debts are too high or your income is too low. If you are behind on a secured payment, such as a mortgage, you may file a Chapter 13 bankruptcy to repay past due payments over time without late charges. You may also file a Chapter 13 bankruptcy if you have assets that you would lose in a Chapter 7 liquidation proceeding and wish to keep those assets.
A Chapter 11 is a reorganization proceeding typically used by businesses, but also may be used by individuals who do not qualify for Chapter 13 because of their substantial debts. The purpose of a chapter 11 proceeding is to provide temporary relief from pre-bankruptcy debts while formulating a plan to restructure those debts by payments over time or surrender of unnecessary assets to reduce the overall debts structure. This procedure also allow the ability to reduce secured debts down to the value of the collateral (real estate, car, etc.), as well as the rejection and surrender of leases and contracts that are no longer necessary.
First Meeting of Creditors – aka Section 341 Meeting
The debtor must appear at the ”first meeting of creditors” (also called the Section 341 meeting from the section of the Code that describes the meeting.) At the meeting, the trustee will ask the debtor questions under oath about assets and liabilities. Creditors can also question the debtor on those subjects, but seldom do. These 341 meetings usually last five to ten minutes in most cases.
After the Section 341 Meeting – Getting to discharge
Creditors and the trustee have approximately 60 days from the date of the 341 meeting in which they may challenge the debtor’s right to a discharge (Bankruptcy Code § 727) or the dischargeability of a particular debt (Bankruptcy Code § 523 (a) (2), (4), (6),and (15)) by filing an adversary proceeding. Typically, adversary proceedings are filed where there has been some type of fraud by the filer within a period of time before the case is filed. These types of proceedings are rare.
Failure to take the post-filing financial management class and file the certificate of completion of that class can result in the case being closed without entry of a discharge. The court may charge a new filing fee to reopen the case, file the certificate and then enter the discharge.
Individual debtors get their discharge within approximately four (4) months from the filing of the case. The discharge wipes out dischargeable debts that existed at the commencement of the bankruptcy case.
After the Discharge
Certain debts survive a Chapter 7 bankruptcy because they are excepted from the discharge by law: for examples, most taxes, child support and alimony, student loans, liens and reaffirmed secured debts are among the kinds of debts not discharged in Chapter 7.
The “Means Test”
The bankruptcy “means test” determines whether your income is low enough for you to file Chapter 7 bankruptcy. It’s a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy when they have sufficient income to at least pay back part of their debts and then discharge the unpaid balances after the Chapter 13 plan payments are completed.
Since almost everyone must take the means test, it does not require that the filer be completely broke and penniless in order to file a Chapter 7 bankruptcy. You can earn significant monthly income and still qualify for Chapter 7 bankruptcy if you have a lot of expenses, such as a high mortgage payment. The test is a complicated formula that takes many factors into consideration.
The means test was primarily designed to limit the use of Chapter 7 bankruptcy to those who truly cannot pay their debts. It does this by deducting specific monthly expenses from your “current monthly income” (your average income over the six calendar months before you file for bankruptcy) to arrive at your monthly “disposable income.” The higher your disposable income, the more likely you won’t be allowed to use Chapter 7 bankruptcy. Then, your expenses and standard IRS averaged expenses are deducted from the current monthly income to see if there is any net income at the end of the test that can be used to repay creditors.
There is an exception to the means test: only bankruptcy filers with primarily consumer debts, not business debts, are required to take the means test.
The first step is simple: If your current monthly income is less than the median income for a household of your size in your state, you pass. Period. You’re done. You do not need to complete the rest of the means test. You can file for Chapter 7.
For those whose household income exceeds the state median, the means test computations get significantly more complex. You must determine whether you have enough income left over (called “disposable income”), after paying your “allowed” monthly expenses, to pay off at least a portion of your unsecured debts (such as credit card bills). If your disposable income adds up to more than a certain amount, you fail the means test and cannot file for Chapter 7 bankruptcy.
Median income levels vary by state and household size. Each county and metropolitan region has different allowed amounts for categories of expenses: basic necessities, housing, and transportation.
If the means test sounds complicated, that is because it truly is complicated. An experienced West Palm Beach bankruptcy attorney can help you determine whether you pass the means test and can then file a Chapter 7 bankruptcy.
Exemptions (under Florida law)
The bankruptcy code allows each individual who files bankruptcy to keep basic assets deemed necessary for the debtor’s “fresh start” after bankruptcy. That property is known as the debtor’s “exempt property.”
Exemptions are the one place where bankruptcy law varies from state to state. Congress created a set of exemptions in the bankruptcy code, but allowed each state to “opt-out” of those exemptions in favor of the state exemptions. Florida has opted out and residents of Florida use the Florida state exemptions, which can be very generous in some regards.
The debtor claims property as exempt in the schedules that are filed to initiate the bankruptcy case. If no objections are filed to the exemptions, they become final 30 days after the meeting of creditors. Exempt property is then no longer property of the bankruptcy estate and not available to the trustee to sell and creditors cannot seek to take it away.
The point of bankruptcy is to get a fresh start and that is only possible if the debtor has something to start with when the procedure is completed. However, sometime certain necessary assets may not be exempt and the filer may have to buy that asset back from the trustee.
You must have lived for two (2) years in the state in which you are filing bankruptcy to use the exemptions of that state. If you have not lived in the state for two (2) years, then the exemptions of the state in which you lived in the six months beyond the two year look-back period apply. If no state’s exemptions are available, you are entitled to use the federal exemptions. This gets confusing, so if you have not lived in the state in which you are residing for the past two years, it is best to consult with an experienced attorney regarding which exemptions apply to you.
Most Chapter 7 cases are no-asset cases: that is, the debtors give up nothing to the trustee because the exemption laws allow debtors to retain certain assets free from the claims of their creditors. For example, household goods and furnishings, clothing, equity in a home and equity in a vehicle are examples of exempt assets. Some of these assets are exempt to the full value of the asset while others are exempt only up to a certain value. That value is determined by the laws of the state in which you are filing – or the federal exemption laws, if your state allows you to choose to use the federal exemption laws.
Pensions, 401K’s and Ira’s
Pension rights and 401(k) plans, which are frequently one of the filer’s largest asset are not property of the estate.
IRA’s and other retirement savings may be property of the estate but are frequently exempt. The 2005 amendments to the Bankruptcy Code increased the exemption for IRA’s for all debtors, regardless of state of residence, to $1million.
Valuation of Assets
The values in the exemption statutes refer to the present sale value of the item (not its purchase price or its replacement value).
If an asset is subject to a mortgage or a lien, it is the value of the item after deducting the amount of the lien or liens (the equity) that is used to figure the exemption. Also, the law looks only to the value of the debtor’s share of the equity in an item if it is co-owned with other people or entities.
Contact Our Experienced West Palm Beach Bankruptcy Attorneys
While a serious undertaking, a bankruptcy action can help you discharge debts, preserve assets, and give you a financial fresh start. Taking the time now to review bankruptcy attorneys can ultimately transform your life for the better. Ask yourself some key questions:
- Which Chapter 7 bankruptcy or business bankruptcy attorney feel right for you and your situation?
- Do you know of a West Palm Beach bankruptcy attorney who has a highly nuanced understanding of Chapters 7, 11 and 13?
- Does the attorney you are considering know how to maximize your exemption of asset surrender to creditors?
- Might business or personal affairs in Royal Palm Beach, Port St. Lucie, Vero Beach, Okeechobee or elsewhere complicate the proceeding, and how might those complications be mitigated?
At the Law Offices of Kelley Fulton Kaplan & Eller we understand that tough economic times, and not a lack of personal financial responsibility, cause people to file for bankruptcy relief. We can be more than your bankruptcy attorneys, we can help you avoid bankruptcy through skilled litigation, contracts, and asset protection. Contact our West Palm Beach bankruptcy attorneys today for more information or assistance.