Bankruptcy

The Ross Law Firm, P.A. is highly experienced in bankruptcy law. With attention to detail and sensitivity we can help guide you through your financial hardships and assist you in eliminating your debt and saving your home. We provide you with all available options and assist you in deciding what chapter of bankruptcy best suits your specific needs, while keeping you fully informed through each step of the bankruptcy proceeding.

Bankruptcy is handled in federal courts, and the rules are found in the U.S. Bankruptcy Code. The various types of bankruptcy are referred to as chapters in the Code. Declaring bankruptcy can help relieve an individual or business of legal obligations to pay debts and allow the ability to function financially.

Toni’s specific areas of expertise include:

Chapter  7

Sometimes referred to as liquidation bankruptcy, Chapter 7 is the most common type of bankruptcy in the United States. Chapter 7 provides for the sale or liquidation of an individual’s property that is subsequently distributed to creditors. One’s liability on all dischargeable debts—credit card debt, utility obligations, personal and other loans—is extinguished. The liquidation is handled by a bankruptcy trustee. It is often the most direct way for individuals strapped with credit card debt or excessive medical bills. Eligibility for Chapter 7 bankruptcy requires individuals to demonstrate that their income is not adequate to pay even a portion of their debts. This is referred to as a means test.

Businesses that file Chapter 7 may be provided with a trustee that operates the business for a certain time period. Appointed by the courts, the trustee handles asset liquidations, and proceeds.

Chapter 13

This is the second most common type of bankruptcy that individuals file. Often referred to as wage-earner bankruptcy, Chapter 13 is used primarily by individuals to reorganize their financial affairs as part of a repayment plan. It provides for adjustment of debts of an individual with regular income. The individual puts together a financial plan based on monthly income and expenses, showing how much can be paid toward the debt each month to satisfy the total debt within three or five years. The court and bankruptcy trustee review the proposed plan. The Bankruptcy Code stipulates that eligibility for Chapter 13 relief requires an individual consumer to have regular income and for their debt not to exceed a certain amount.

Chapter 13 bankruptcy is advantageous in that it allows a debtor to keep property and pay debts over time. It also will keep any further interest from accruing on dischargeable debt.

Chapter 5

The Small Business Reorganization Act (SBRA), which went into effect in February 2020, created new procedures for a Chapter 11 bankruptcy. The SBRA—commonly known as Subchapter 5, referring to a new Subchapter 5 of Chapter 11 of the Bankruptcy Code. It was initially geared toward businesses with total debts of up to $2.75 million. However, the financial consequences of COVID-19 have hit small business especially hard, and many have struggled to stay afloat. The CARES Act of 2020 expanded Subchapter 5 eligibility to businesses with debts of up to $7.5 million for one year. This change was made to help with the expected increase in business bankruptcies as a result of the pandemic.

Subchapter 5 bankruptcy provides the benefit of allowing continued business operations. A business owner can continue to own and run a business if the owner adheres to the payment plan. Further, the bankruptcy court can confirm the reorganization plan without creditor approval. A traditional Chapter 11 plan must be approved by creditors. Also, detailed disclosure statements are not required to be filed.

Reaffirmation of mortgage and/or auto
A reaffirmation agreement is a new contract between an individual and a mortgage or car lender that reinstates the individual’s liability to pay the loan. Debtors do not automatically qualify for a reaffirmation agreement, and it has to be entered into and filed while the bankruptcy case is active.

Reaffirming a mortgage or car loan has benefits. Reaffirmation provides certainty against repossession. Additionally, it can also help to rebuild credit. When the loan is reaffirmed, the lender will continue reporting payments to credit reporting agencies. It also could enable one to negotiate better terms with the lender.

Homestead protection
The homestead protection is a legal provision that helps protect a home from certain creditors following the homeowner declaring bankruptcy or the death of a homeowner’s spouse. This exemption is designed to provide physical shelter and financial protection, precluding the forced sale of a primary residence.

The exemptions for homestead properties vary by state. Florida affords unlimited financial protection against unsecured creditors for the home; however, limits for acreage may apply for the protected property. To qualify for homestead exemption, homeowners have to occupy the home as their primary residence. Also, the protection limits are for the homeowner’s equity in the home and not the value of the home. Another caveat is that protection for the homestead property does not apply for secured creditors—specifically, a bank that holds the mortgage on the home.