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Introduction
This basic information
about Chapter 7 bankruptcy should assist you in understanding the course of
events that occur when you file a Chapter 7 bankruptcy. If you cannot
find the answer to your question here, you may e-mail your questions to your
bankruptcy attorney.
The New Bankruptcy Law
The new bankruptcy law
(effective October 17, 2005) makes filing bankruptcy more complicated.
The new law is accompanied by new rules, new forms, and additional work for
debtors and their attorneys. Additionally, there are many parts of the
new law which are ambiguous and subject to multiple interpretations. As
judges interpret and clarify the new bankruptcy law through court decisions,
the new law will become more clear. Since
bankruptcy courts are located all over the country, even if one judge
interprets a part of the new law, it will take time for that interpretation to
be tested on appeal and for the ultimate ruling to spread throughout the
country's legal community. Your bankruptcy attorney will try to advise
you as best as (s)he can about the effect of the new
law on your situation. There is some uncertainty about how the new
bankruptcy law may impact your bankruptcy case.
Filing Chapter 7
Bankruptcy in Florida
A permanent resident of
Florida can file bankruptcy in a Florida bankruptcy court. Florida has three
bankruptcy districts (Southern District, Middle District, and Northern
District), and each of Florida’s counties is assigned to one of the three
bankruptcy districts. You must file bankruptcy in the district where you
reside.
An important concept in both Chapter 7 and Chapter 13 bankruptcy is
“exemptions” or “exempt property.” When you file a Chapter 7 bankruptcy, the Trustee
takes all of your “non-exempt” property and sells it for the benefit of your
unsecured creditors. The Trustee cannot take your exempt property and you may
keep all of your exempt property regardless of its value and amount. What
property is “exempt” and what property is “non-exempt” depends on the exemption
laws of the applicable state. Each state has its own and different laws about
what assets are exempt and non-exempt for bankruptcy purposes. Therefore,
before you file bankruptcy you and your bankruptcy attorney must ascertain
which state laws will determine your exempt assets.
Florida has liberal bankruptcy exemptions for some assets, including an
unlimited homestead exemption in most cases, and limited exemptions for other
assets. Only Florida residents are eligible for Florida exemptions. Just
because you are a Florida resident when you file for bankruptcy does not mean
you are entitled to Florida exemptions in bankruptcy.
Under the new bankruptcy law the state exemption law applicable to your
bankruptcy is determined by the state in which you have been domiciled for the
730 days (two years) immediately preceding your filing date. If you have not
been a permanent resident of Florida for the two-year period immediately
preceding your bankruptcy, then your bankruptcy exemptions will be those
allowed by the state in which you were domiciled for 180 days immediately
preceding the two year period, or the state in which you were domiciled for the
longer portion of such 180-day period.
Otherwise stated, a person filing bankruptcy in Florida today is eligible for
the property exemptions he could have claimed if he had filed two years ago. If
this person was a Florida resident two years ago he claims Florida
exemptions today; if two years ago he was a resident of a different state then
he is entitled to the exemptions of the state of his prior residence.
Consider a person who
sells his residence in Georgia for $100,000 and moves to Florida in January.
In March of that year he purchases a Florida homestead for $100,000. The
person gets a Florida drivers license and registers to vote in Florida. In
March of the following year, 14 months after becoming a Florida resident, the
same person loses his job and files bankruptcy. Under the new bankruptcy law,
Georgia’s relatively limited exemption laws would apply to this bankruptcy,
and the debtor would not have the benefit of Florida homestead protection. |
In reality, the laws about bankruptcy exemptions are even more complicated than
the example above. Many issues are unclear in the new law and will have to be
resolved over time through court decisions. Before you file bankruptcy in
Florida you and your bankruptcy attorney should discuss where you have resided
during the past few years and should discuss whether Florida bankruptcy
exemptions would apply in your case. In many cases, the state where you moved
from will provide better bankruptcy exemptions than will Florida law.
Exempt and Non-Exempt
Property in Florida
If Florida exemption law
applies to your bankruptcy, the following are the principle bankruptcy
exemptions under Florida law.
Exempt Property
1. Homestead.
Your homestead is exempt property under Article X, Section 4 of the Florida
Constitution. This protection is afforded homestead properties situated on
one-half acre or less within a municipality and properties up to 160 acres
outside a municipality. There is no dollar limitation. The homestead exemption
applies to all Florida residents. The new bankruptcy law does not affect
homestead protection for Florida residents in state court proceedings.
The new bankruptcy law does change the homestead exemption for Florida
residents who file bankruptcy. Under the new law you can protect unlimited
equity in your homestead provided you purchased the residence 40 months or more
prior to filing bankruptcy. If you purchased your home within 40 months the new
law exempts up to $137,000 of equity. The exemption amount is increased
(effective April, 2007) from the original $125,000 to approximately $137,000
per person. Additionally, if you injected cash in your home within the 40
months, such as by paying down the mortgage or building a home addition, the
amount of investment made within the 40 months will not be exempt even if you
purchased the home 40 months prior to filing. The $137,000 homestead exemption
limit applies only in bankruptcy cases. Several courts have held that a married
couple filing jointly can claim two homestead exemptions for a total homestead
protection of $274,000.
2. Statutory Exemptions Chapter 222 of the Florida Statutes includes
several categories of exempt property, including: pensions, 401K plans, tax
deferred retirement plans, Social Security income, disability income, IRAs,
annuities, cash value of life insurance, college investment plans (including
529 Plans), health savings accounts, and hurricane savings accounts.
3. Automobile Exemption: You are allowed to exempt $1,000 of equity in
an automobile. Spouses who jointly own a car may exempt $2,000 of value in that
car. Most bankruptcy trustees use the average retail/wholesale value from the
yellow NADA book, adjusted for the condition of your car. If the balance of
your car loan is greater than the car value (“upside down”) then you have no car
equity and your car is protected in bankruptcy so long as you keep your car
payments current.
4. Miscellaneous personal property exemption. Each bankruptcy debtor is
allowed to exempt $1,000 ($2,000 for joint filings) of all other personal
property including furniture, cloths, tools, and estimated cash on hand. For
bankruptcy purposes the value of your personal property is its current fair
market value at a public market such as a garage sale or flea market sale. A
new Florida statute effective July 1, 2007, provides a $4,000
"wildcard" personal property exemption to bankruptcy debtors who do
not claim a homestead exemption. You must not own a home or intend to surrender
the home you do own to the mortgage lender in order to qualify for the wildcard
exemption. Joint debtors can claim a $8,000 wildcard
exemption.
Non-Exempt Property
Any property which is
not exempt under Florida law is included in the bankruptcy estate. The
Chapter 7 Trustee may take and sell all non-exempt property and distribute the
proceeds to the unsecured creditors. (You will have the opportunity to
keep your non-exempt property by entering into a "buy-back" agreement
with the Trustee. If you execute a buy-back agreement with the Trustee,
you will make either a lump sum payment to the Trustee or make monthly
installment payments over a period of several months.)
Credit Counseling
The new bankruptcy law requires that anyone who files bankruptcy must received
credit counseling and financial education by approved providers as a condition
for filing bankruptcy and discharging debts. No one can file bankruptcy unless
they complete accredited credit counseling within 180 days of their bankruptcy
filings. The credit counseling can be provided in person, by telephone
conference, or over the internet. You have to pay for credit counseling, but
the costs will be regulated by the United States Bankruptcy Trustee office. You
will be required to file a certificate from the credit counseling agency
verifying the course completion with your bankruptcy petition. If credit
counseling resulted in a debt repayment plan, you must file a copy of the plan.
Your bankruptcy attorney can tell you where to find approved credit
counseling providers.
In addition, during the course of your bankruptcy you must also complete an
instruction course concerning personal financial management in order to have
your debts legally discharged. As is the case with credit counseling, financial
management courses may be provided by phone or on line. You are responsible for
the course fees. Your bankruptcy attorney can tell you where to find approved
financial management providers.
Eligibility
For Chapter 7 Bankruptcy
Under the old bankruptcy law almost any resident of the United States could
file Chapter 7 bankruptcy. The new bankruptcy law includes a formula test,
called the means test,
to determine who may (and who may not) be eligible to file Chapter 7
bankruptcy. The means test applies only to people whose debts are primarily
consumer debts. Consumer debtors include credit card debts, car debt, or
mortgages for the primary residence. Many people are forced into bankruptcy
because of non-consumer debt such as debts from a failed business, large
business related judgment or delinquent mortgages on investment real estate.
Those people whose debts are primarily business or investment debts, or debtors
who owe primarily other non-consumer debts such as taxes or student loans, are
exempt from the means test; these people may file Chapter 7 bankruptcy
regardless of their income and expenses. Most importantly, if your family
income is less than the median income for similarly sized Florida households
you too are exempt from the means test. As of October, 2008, the Florida median
income for a two-person household is approximately $52,000. The median income
for a single person is approximately $41,000.
The means test formula is designed to evaluate whether the debtor has the
financial means to pay back a substantial part of his debts in a repayment plan
through Chapter 13 bankruptcy. The means test formula considers measures of
income and allowable expenses. If, according to results of the formula, you do
not have sufficient net monthly income to repay debts you are eligible to file
Chapter 7; if the formula says you can repay your debts you are not eligible
for Chapter 7 bankruptcy unless you prove "special circumstances" of
hardship such as a recent job loss or medical problem. You may be
eligible for relief in Chapter 13 bankruptcy.
The means test formula is very complex and several of its important terms are
counter-intuitive. The formula incorporates a variety of government statistics
from several sources as well as information about each debtor’s financial
situation. Calculations under the formula are difficult to do without a
professional computer program designed for bankruptcy attorneys to prepare
bankruptcy petitions.
You may not obtain a
discharge in a Chapter 7 bankruptcy within 8 years of the filing date of a
previous bankruptcy in which you received a Chapter 7 discharge- the
prohibition is 8 years from the prior filing date rather than the prior
discharge. There is a 6 year wait after a prior Chapter 13 discharge. Thus, a debtor may obtain a discharge in a new Chapter 7
cases as long as 6 years have passed since the filing of a prior Chapter 13 chase in which a discharge had been granted. In addition,
there is no time restriction on obtaining a discharge in a new chapter 7 chase
after a prior Chapter 13 case in which a discharge was granted if 100% of the
allowed unsecured claims where paid, or in which the actual payments under the
previous Chapter 13 plan comprised at leas 70% of the
allowed unsecured claims in that case.
A summary of the means test and its most important terms and definitions is
provided in the bankruptcy section elsewhere on this website.
Basic
Bankruptcy Information
Secured or Unsecured Debts. The bankruptcy petition asks you to list secured debts separately
from unsecured debts.
Unsecured
debts include personal loans
and credit cards issued by banks, such as Visa, MasterCard, American Express,
or Discover, and other credit cards used to purchase consumable items. Vehicle
leases are unsecured debts. Medical bills and personal loans are also unsecured
debts.
Secured
debts include those debts
where the creditor has a security interest in your property to guarantee
payment. Examples of secured debts include mortgages, car loan, loans from
finance companies (usually secured by household items), furniture, computers or
electronics. If you purchased store goods using a store credit card, such as a
card from Circuit City, Rooms to Go, Best Buy, Rhodes, etc., the store probably
has a security interest in certain items purchased, which makes the store a
secured creditor.
Secured Property. After filing a Chapter
7 bankruptcy, you will have to choose to either reaffirm secured debts or
surrender the secured items to the creditor. You are entitled to keep any
secured property as long as you continue to pay the loan for that property. If,
however, you elect to surrender secured property, the secured creditor may not
thereafter recover any money from you personally on account of that debt. Some
mortgage companies recently have required borrowers to sign
cross-collateralization agreements by which the mortgage borrowers pledge bank
accounts and other financial instruments to secure their mortgage. A
cross-collateralization clause allows the mortgage lender to get money in your
financial accounts to pay delinquent mortgage payments. If you are unsure whether
you pledged financial accounts to your mortgage
lender you should review the papers you signed when you got your mortgage.
Reaffirmation Agreements. The law requires you to execute a reaffirmation agreement for
secured personal property you want to keep. You must sign a reaffirmation
agreement within 45 days of the first meeting with the trustee (the meeting of
creditors or 341 meeting). If you do not sign the reaffirmation agreement or
redeem the property within 45 days, the automatic stay is lifted as to that
property and the creditor is permitted to take all legal action allowable under
the law to repossess the property (if payments are not current). Signing a
reaffirmation agreement means that you will be personally liable to pay the
debts after your bankruptcy is over. You do not have the unlimited right to
reaffirm a debt. Your attorney must sign your reaffirmation agreement if he
believes you can afford the debt. If the attorney is not sure you can afford
reaffirmation, the attorney may choose not to sign our reaffirmation agreement.
In that event, you must go before the bankruptcy court judge and explain why
you believe you can afford reaffirmation and why reaffirmation is in your best
interest.
Redemption. Bankruptcy also gives you the option to
“redeem” secured personal property such as furniture, computers, automobiles,
or other property purchased on credit and subject to a lien in favor of the
lender. Redemption means purchasing the property from the secured lender at its
current retail market value considering its age and condition. When the current
retail value is less than the amount due under the loan, redemption can be
financially beneficial.
Student Loans. Student loans are not dischargeable unless you
can show that your loan payments impose “undue hardship.” In order to eliminate
your student loans under the “undue hardship exception” you must file a
separate motion with the bankruptcy court, and you must appear before the
bankruptcy judge with proof of your hardship. As a practical matter, it is very
difficult to demonstrate undue hardship unless you are physically unable to
work.
Procedure
Before Filing
Unfair
Debt Collection. The Federal Fair Debt
Collection Practices Act (the “Act”) prohibits unfair collection of consumer
debts. If you can prove that your creditors intentionally and repeatedly
violated the Act before or after you retained your bankruptcy attorney, you may
be able to recover damages. The following is a summary of a few prohibited debt
collection practices:
1. Calling you before 8 a.m. or after 9 p.m. local time.
2. Contacting you directly after you told the creditor you retained me to
represent you.
3. Telling your employer or co-worker that you owe money to the creditor.
4. Calling you at work after you have told them not to.
5. Intentional and continuous harassment or abuse in connection with a debt.
6. A creditor’s representative falsely representing that he is an attorney when
in fact he is not licensed to practice law.
7. Threatening you with arrest or imprisonment for failing to pay a debt.
8. Communicating with anyone other than you our your spouse about your
debt.
The debt collection laws are complicated, and your right to recovery will
depend on your specific facts and your evidence. Contact your bankruptcy
attorney if you believe you can prove one of your creditors intentionally and
repeatedly engaged in unfair collection practices. A copy of the complete Act
is available at http://www.ftc.gov under Consumer Information.
Use of Credit Cards. Do not use any credit
cards after our initial consultation with your bankruptcy attorney or once you
have decided to file bankruptcy. If you have charges or cash advances in
the months preceding filing bankruptcy, the creditor may file an adversary
complaint alleging that you incurred recent charges with fraudulent intent and
without the intent and/or ability to repay these debts.
Credit Union Loans. Many credit unions will
make you close your checking and savings accounts if
you discharge a loan or credit card debt from the same credit union. In such
event, you will have to open new checking and savings accounts at a different
financial institution. Additionally, your credit union loan may be secured by
funds in your credit union accounts, and in such event, the credit union can
seize money in these accounts to pay the loan prior to the filing of the
bankruptcy petition. You should examine your loan documents or talk to your
credit union if you are unsure whether or not your credit union loan is secured
by money in the accounts. Many credit unions also “cross-collateralize” loans,
which means that a credit card account may be secured by other property such as
your automobiles.
Get
a Credit Report. You must obtain a
credit report and furnish a copy to our office prior to filing bankruptcy. If
you have recently been denied credit, you are entitled to a free credit report
from the reporting agency. Instructions for obtaining this report should be on
the letter you received denying credit. Also, a recent federal law gives you
the right to obtain a free credit report once a year. You can obtain a free
credit report from one or all of the primary credit reporting agencies at http://www.annualcreditreport.com.
The Automatic Stay. The automatic stay acts
like a shield between you and your creditors by prohibiting the commencement or
continuation of creditors’ judicial proceedings against you as well as all
collection efforts. The automatic stay does not begin when you hire a
bankruptcy attorney, but begins only after you file your bankruptcy petition.
Limits on Automatic Stay in Subsequent Bankruptcy. If you file a bankruptcy petition under Chapter 7 or Chapter 13
within one (1) year of the dismissal of an earlier case, the automatic stay in the
second case terminates thirty (30) days after the second bankruptcy unless you
demonstrate that the second bankruptcy was filed in good faith with respect to
the creditor sought to be stayed. A second repeat bankruptcy filing within the
same one (1) year period will not effect
the automatic stay.
Attorney Certifications.
The new bankruptcy law
places additional duties on bankruptcy attorneys representing debtors in
Chapter 7 bankruptcy cases. Your bankruptcy attorney must certify to the court
that he or she has performed a reasonable investigation into circumstances
giving rise to your bankruptcy, that your bankruptcy
petition is well-grounded in fact, and the attorney has determined that your
bankruptcy does not constitute an abusive filing. Also, the bankruptcy attorney
must certify that, after reasonable inquiry, he or she has no knowledge that
the information in your bankruptcy schedules is incorrect. These requirements
increase the attorney’s duties and liability. Your bankruptcy lawyer may ask you
to provide copies of your pay stubs, checking account statements, credit
reports and certain other information about your finances and assets.
Trustee Meeting After
Filing the Petition
Notice of Meeting of Creditors. When the petition is filed, a combined Order Scheduling a Meeting
of Creditors and Fixing Filing Dates for Claims, Complaints Objecting to
Discharge, and Complaints Seeking Exception to Discharge will be sent by the
Court to all creditors, to you, and to your attorney's office. This is commonly
referred to as the “341 Notice” or the “Creditor Meeting Notice.” You should
receive this Notice from the bankruptcy court approximately ten (10) days after
your petition is filed.
What is a Trustee and What Does He/She
Do? The “Bankrupt Estate”
consists of all legal and equitable interests you have in property as of the
date the case is filed. In Chapter 7 one primary job of the Trustee is to
gather all of your non-exempt assets, sell those assets, and distribute the
proceeds among all your unsecured creditors. A Trustee is randomly appointed by
the Court immediately upon the filing of a Chapter 7 petition. The Trustee is
usually a private attorney and is compensated primarily by a percentage of the
non-exempt assets he or she is able to collect and distribute to your creditors
Meeting
with Trustee. The meeting with your
Chapter 7 trustee (the “creditors meeting” or “341 meeting”) is held in a
conference room, not the courtroom, and the federal bankruptcy judge is
prohibited by law from being there. Typically this meeting will last about five
minutes. The trustee will ask you questions about your banrkuptcy
petition. Your bankruptcy attorney can tell you what questions to anticipate.
Who
attends? You are required to
attend the creditors meeting with the bankruptcy trustee (if filing jointly,
both husband and wife must attend). Your bankruptcy attorney will accompany you
and represent you at the meeting. As a practical matter very few, if any,
unsecured creditors attend. The trustee's job is to represent all creditors
whether or not a creditor attends the meeting of creditors.
What
Happens at the Creditors Meeting? The Chapter 7 Bankruptcy Trustee will ask you questions, but (s)he will not interrogate you, cross-examine you, or threaten
you. The trustee may ask you why you filed bankruptcy. The trustee often asks
questions about your assets and your sources of income.
Tax Returns. The new bankruptcy law gives the Chapter 7
Trustee (or the Judge) the right to verify information about your income by
reviewing copies of your income tax returns. Upon request of the court, the
Chapter 7 Trustee (or the US Trustee) may request that you file a copy of your
federal tax return (or a tax transcript) for the tax year ending during the
time the case is pending and/or for the three years prior to the filing of the
petition. As a practical matter, you should file with your bankruptcy petition
a copy of your last two federal tax returns filed with the IRS. Income tax
refunds are property of the bankruptcy estate and will be paid to the Chapter 7
trustee.
OTHER THINGS THAT HAPPEN AFTER FILING
Suggestion
of Bankruptcy. You should provide a copy of any lawsuits you
have received to your bankruptcy attorney or provide a copy of the bankruptcy
court's notice of the commencement of your case to your civil attorney, so that
a Suggestion of Bankruptcy can be filed in any civil case in which you are a
party.
Relief from Stay. In Chapter 7 bankruptcy cases secured creditors typically file a
Motion for Relief from the Automatic Stay so that they are able to foreclose on
your secured property in the event you do not pay your secured debt in a timely
manner. Relief from stay motions are most often filed by mortgage lenders or
car finance companies. The Court will usually grant this Motion but that does
not mean that the creditor can take your property. The creditor can take your
property only if you do not pay the loan in a timely manner under the terms of
your mortgage or loan contract with the creditor, and
only after the creditor forecloses its mortgage or lien in state court.
If you are behind in your car loan payments, however, the creditor can
repossess the vehicle once the stay is lifted.
Procedure for Stay Motions. When a secured creditor
files a Motion for Relief From Stay the court will set
a hearing. Since the court usually grants the Motion, most bankruptcy attorneys
do not attend the hearing, and in many instances your attorney will consent to
the granting of the Motion. You do not have to attend the hearing unless you
want to contest the Motion, in which case, you should contact your bankruptcy
attorney in advance.
Transferring
Property After Filing. Immediately upon the filing of a bankruptcy
petition, a legal “estate” is created by the law which consists of everything
you own at the time you filed bankruptcy. This is called the “bankruptcy
estate.” In fact, one of the Trustee’s principal duties is to collect the
bankruptcy estate (that is, locate and assume
jurisdiction over all the property). You should never sell, give away, or
transfer any of your real or personal property which is part of your bankruptcy
estate either immediately before or after the filing of your petition without
checking with your bankruptcy attorney.
ADVERSARY
MATTERS
Adversary
Claim by a Creditor. The majority of
Chapter 7 cases do not involve adversary matters; however, if a creditor
believes it should not be discharged, it may file, or threaten to file, an
Adversary Case against you during the bankruptcy proceeding. The most common
grounds for the filing an adversary case is “fraud.” Fraud in this context is
not criminal, but it means that you allegedly have abused the bankruptcy
process. For example, if you used credit to buy property or take cash advances
prior to filing bankruptcy when you were insolvent, did not anticipate repaying
the debt, or planned to file bankruptcy, this could be grounds to set aside a
discharge of debt for fraud, and the creditor may have a basis to file an
adversary case.
Adversary Claim by Trustee. The Trustee may also file an adversary case to
recover non-exempt property. A Trustee may also file a motion to value property
which he believes you have undervalued in order to exempt under your $1,000
personal property exemption. If the Trustee convinces the court to increase the
property value, he can then recover any of your property in excess of your
exemption limit.
Trustee's Objection to Exemptions. The Chapter 7 bankruptcy trustee has 30 days after the creditors meeting
to object to any exemption of property claimed on your bankruptcy petition.
Absent trustee objection, all property listed as exempt, including your
homestead exemption, is exempted in bankruptcy and is not part of your
bankruptcy estate. If the trustee objection to a claimed
exemption, the court will set a hearing to rule on your exemption.
Absent objection by the trustee all assets claimed as exempt on your bankruptcy
petition are protected.
The Bankruptcy Discharge
60-Day
Waiting Period. After the Creditors Meeting, there is a 60-day
period during which time creditors can file claims if they believe you have
non-exempt assets and during which creditors may object to being discharged
provided they have legal grounds. Grounds for objection to discharge include
the fraud, student loans, alimony and support obligations etc.
Discharge
Order. A minimum of 60
days (usually more) following the creditors meeting you should receive a copy
of a court order that discharges your debts. The discharge order wipes out your
debts and liability to creditors in your bankruptcy. Do not expect to receive
your discharge immediately after 60 days.
Discharged Debts. The entry of a discharge order does not affect a secured
creditor’s rights in property which you pledged to repay the secured creditor.
The secured creditor can always repossess the secured property if you do not
pay according to your loan agreement. In addition, the discharge order only
discharges debts that “are dischargeable.” Therefore, the order does not
eliminate non-dischargeable debts, such as student loans, ineligible tax
liability, or loans procured by fraud or by abuse of the bankruptcy system. The
Order of Discharge does not give you a list of specific debts that were
discharged; it simply states that dischargeable debts are discharged.
Debts
Not Discharged. The Bankruptcy Code
has a list of debts which cannot be discharged in Chapter 7 bankruptcy. These
non-dischargeable debts include:
• Debts incurred through fraud or embezzlement;
• Recent income tax liability;
• Education loans / student loans;
• Fines and penalties payable to the government;
• Child support, alimony, and property settlement obligations;
• Debts incurred for the purchase of luxury goods.
There is a presumption
of non-dischargeability for cash advances of over
$750 taken within seventy (70) days of filing and for purchase of more than
$500 within ninety (90) days of filing.
CLOSING
YOUR CASE
Approximately 30 to 45 days after the Discharge, you will receive another
notice stating that your case is closed. This means that your bankruptcy case
is over.
LIFE AFTER BANKRUPTCY
Bankruptcy
and Your Credit Rating. Bankruptcy will appear on your credit
report for several years. This does not mean you cannot get credit after filing
bankruptcy. Most lenders will extend credit within two or three years after
filing a bankruptcy case. Many creditors consider you a better credit risk
after you filed bankruptcy because you have few other debts, if any, and you
are unable to file bankruptcy again for seven years.
Generally, the effect of bankruptcy on your credit is not a bankruptcy issue;
it is a banking or credit issue. Most questions concerning reestablishment of
credit are best answered by people at banks, credit agencies, or consumer
credit services. Most banks and mortgage companies state that a debtor can
establish normal credit two years after filing Chapter 7 bankruptcy.
Many debtors report that after filing bankruptcy and receiving their discharge
notice that their credit reports still show certain debts as “written off” or
“discharged.” It may take the credit reporting agencies several months to
update your file. Regardless of what is on your credit report, no creditor
listed in your bankruptcy can collect money from you. If your credit report
incorrectly reports certain debts you must resolve errors directly with the
credit bureau because no bankruptcy law issues are involved in the incorrect
reporting of your credit history. If you have contested the error
directly with the credit reporting agency and the creditor, and the incorrect
information is not corrected, you may want to contact an attorney to discuss
your legal rights under the Fair Credit Reporting Act.
Bankruptcy and Employment. It is illegal for an
employer to discriminate against you in any way because you have filed
bankruptcy.
ORIGINALLY WRITTEN BY JONATHAN B. ALPER, ESQ. - ATTORNEY IN LAKE MARY FLORIDA
ACTIVE MEMBER OF