Florida Bankruptcy FAQs
Below are questions frequently asked by individuals considering filing for bankruptcy. The responses are intended to provide you with a general understanding of various events occurring during the bankruptcy process.
Can I keep my house and car?
Absolutely! Many people believe that if you file bankruptcy, you can keep only one car, or worse, no cars at all or have to surrender your house or personal belongings.
In reality, you can keep everything you wish to – you just have to be prepared to pay your creditors the value of the property you are keeping. In other words, if you own 3 cars, you can keep all of them but in Florida, generally only $1,000.00 of value in a car is exempt, so you will have to pay the value of the cars value to your creditors. If you can’t afford to make a lump sum payment, you can choose to pay the non-exempt value over 3 – 5 years in a chapter 13 case.
In Florida, your house is completely exempt so there are only rare instances where you cannot keep your house if you file bankruptcy.
Mortgage lenders and automobile finance companies are more than happy to keep accepting your current monthly payments both before and after a Chapter 7 bankruptcy. This is called reaffirming your debt. They are in the finance business to make money, not to repossess your property. When the finance company reaffirms the debt, they have the comfort of knowing that you have no other outstanding debts, you cannot file Chapter 7 or 13 bankruptcy for another eight years, and they can continue to collect the principal plus interest under the original loan agreements.
Can I lower my car payment?
Did you know that you can lower your car payment in bankruptcy?
Many people are forced into bankruptcy because a loan company has over-financed a vehicle. A high car payment can make it impossible for you to afford your monthly reasonable expenses. Bankruptcy offers two courses of action to lower your car payment. First, in Chapter 7, you can use the process of redemption to lower your payment. The loan company must accept a payoff on your vehicle equal to the value of the vehicle. We can arrange for you to obtain new financing for the Chapter 7 redemption value of your vehicle and your payment then becomes the lower redemption loan payment.
For instance, if you owe $25,000 on a vehicle that is only worth $10,000, with Chapter 7, you can force the existing finance company to accept a redemption of $10,000 as a payoff on the vehicle. We will arrange the financing for you on the $10,000 balance.
Second, in Chapter 13, you can reduce your car payment by paying only the value of the vehicle plus interest of 4 – 5%. Any money owed to the finance company above the value of the vehicle is typically paid at a low percentage on the dollar.
For instance, again, using the example of owing $25,000.00 on a vehicle that is worth only $10,000.00, in a Chapter 13, you will pay only $10,000.00 at 4% over 3 – 5 years. The remaining $15,000.00 is paid off at typically $1,000.00 over 3 – 5 years.
The end result is a lower car payment each month, giving you the funds you need to pay your other monthly expenses.
Does bankruptcy ruin my credit?
No, actually, it can help you rebuild your credit! First, let us define credit. Credit is your ability to borrow money. Many lenders determine whether or not to lend you money by examining your debt to income ratio; how much outstanding debt you have compared to your income. Remember that the reason that your credit is poor right now is because you have so much outstanding debt and possibly because you have not made on-time payments on this debt. A creditor would rather loan money to the person who has already filed Chapter 7 or 13 bankruptcy, has no remaining debt, and could not file another Chapter 7 or 13 bankruptcy for another eight years.
You are generally able to purchase a vehicle on financing the day you receive your bankruptcy discharge. Often times you will pay a percentage point or two higher than a person with unblemished credit, but ask yourself how low of an interest rate would you be able to get in your present situation. You should be able to finance a home within two years after receiving a bankruptcy discharge, as long as you can provide a minimum down payment and show the ability to make the monthly mortgage payment. Many consumer debtors receive credit card solicitations within months of receiving a bankruptcy discharge.
We caution you against rumors of the Chapter 7 or 13 bankruptcy stigma that you may hear from friends or family, who may not possess the knowledge of bankruptcy law necessary to give legal advice. They may have your best interests in mind, but a little knowledge is a dangerous thing. Speak with an attorney experienced in bankruptcy law to obtain the truth