Scrabble board spelling bankruptcy for an article about discharging your debt with a Florida Bankruptcy

In most cases, obtaining a discharge will be the primary reason why a borrower files for bankruptcy. If a debt is discharged in bankruptcy, the borrower will be released from all personal liability on the debt. Further, creditors will be restricted from taking any collection action against the debtor for debts discharged in bankruptcy. Creditors will not be allowed to call, sue, send letters, garnish wages, or take any other collection action.

Most unsecured loans are eligible for discharge in bankruptcy. Unsecured loans are debts that don’t have collateral. For instance, credit cards, student loans, and medical bills are usually unsecured loans. On the other hand, secured loans give the lender collateral for the loan. For instance,  home mortgages and car loans are typically secured debts.

Not all types of debts are eligible for a discharge in Chapter 7 or Chapter 13 bankruptcy. You should consult with a bankruptcy law firm in Tampa before taking action. An experienced attorney can help get the most out of bankruptcy and obtain the fresh start you need. Bankruptcy law is complex, and the circumstances will depend on the unique facts of each case.

The Discharge

Bankruptcy law 11 U.S.C. 524(a) prevents creditors from holding borrowers personally liable for a discharged debt. For instance, threatening to garnish wages or sue borrowers can be a violation of debt collection laws. A willful violation of the ban on collection activity can lead to sanctions being imposed on the creditor. These sanctions can include an injunction, fines, reimbursement of funds paid by the debtor, and even punitive damages. Additionally, the creditor may be responsible for reimbursing fees borrowers paid their lawyer to fight the case. See bankruptcy case In Re Burson

In order to obtain sanctions, the collection action must be a willful act by the creditor. Voluntary payments made by the debtor will not expose the creditor to sanctions for illegal debt collection activity. However, the payment must indeed be voluntary and not a response to the creditor’s actions to induce payment. For instance, paying a creditor to end harassment of the debtor’s family is not a voluntary payment. Voluntary is viewed in an “objective sense as referring to repayment that is free from creditor influence or inducement.” See In Re Hudson.

Common Examples of Debts Eligible for Discharge

  • Car repossession judgments
  • Wage garnishments
  • Credit cards
  • Medical bills
  • Foreclosure deficiency judgments
  • Personal loans
  • Cash advances
  • Payday loans

Discharging Student Loans in Bankruptcy

In Brunner v. NY State Higher Educational Services, the Undue Hardship Test was established for student loans in bankruptcy. Under the Brunner test, in order to have student loan debt discharged, the debtor must meet four conditions. First, he or she cannot maintain a “minimal standard of living.” Secondly, the borrower is undergoing special circumstances beyond their control, and those conditions are likely to continue throughout the student loan repayment period. Additionally, the borrower has, in good faith, tried to repay the loan.

If you can satisfy all three of the above requirements, a judge may declare your student loans dischargeable.  Passing the Brunner Test to discharge student loans can be difficult. It is rare that a student loan will be discharged in bankruptcy. If you need assistance with discharging student loans, contact a Tampa bankruptcy attorney.

How to Discharge IRS Tax Debt in Bankruptcy

If all four of the conditions below are satisfied your IRS tax debt may be discharged in bankruptcy. If the debt is discharged, the penalties and interest on the taxes will also be discharged in the bankruptcy.

  1. Income Taxes: The taxes owed must be federal, state, or local income taxes.
  2. 3 Year Requirement: To be eligible for discharge, the tax debt must have become due at least 3 years prior to the bankruptcy filing. See Bankruptcy law 11 USC 507. If you received an extension to file taxes, the 3-year clock begins when the extension expires, not the initial due date.
  3. 2 Year Rule: The income tax returns must have been filed at least 2 years prior to the bankruptcy petition. Tax returns that are filed late will still be eligible, as long as they were filed at least 2 years prior to the bankruptcy petition. See Bankruptcy law 11 USC 523.
  4. The 240 day Rule: The taxes must have been assessed at least 240 days prior to the bankruptcy filing. It is important to note, if the debtor files an amended tax return the 240-day clock starts over again, beginning the date the amended return is filed.

If the tax returns were filed with a willful attempt to defraud the IRS, the debt would not be discharged. There is no time limit for fraudulent taxes, and the debt won’t be discharged regardless of when they were filed. To be excluded from eligibility for discharge, the IRS must prove three elements. First, they must prove the borrower had knowledge the tax returns were false. Secondly, they must show the borrower had the intent to avoid paying taxes. Additionally, there must have been an underpayment of taxes. See In Re Kirk.

Eliminate Judgments with a Discharge

Under Bankruptcy law, a discharge will eliminate judgments in bankruptcy, “to the extent that it is a determination of the personal liability of the debtor.” Any action to collect money from the debtor will be barred. Most types of judgments are eligible for a discharge in Chapter 7 or Chapter 13 bankruptcy. However, there are some types of judgments that are excluded from being discharged. Therefore, you should contact a bankruptcy attorney in Tampa to review your judgment before filing bankruptcy.

Most types of judgments are eligible for discharge; however, some judgment debts you can’t discharge in bankruptcy. For instance, alcohol-related injury judgments are non-dischargeable. Similarly, judgments for malicious or wanton conduct resulting in serious bodily injury or death cannot be discharged. If you have debts that are not eligible for discharge all hope is not lost, there may be other options. A bankruptcy lawyer in Tampa can help provide some options for relief.

Restitution judgments are also often excluded from a Chapter 7 or Chapter 13 bankruptcy Discharge. Restitution is often money owed in response to injuring a person or damaging property while committing a crime. See Bankruptcy Law 11 US 727. A common example is causing a car accident while driving drunk.

Child Support and Alimony in Bankruptcy

Child support and alimony will be the first of the unsecured claims to be paid among all your other unsecured creditors. Keep in mind that child support and alimony obligations cannot be discharged through either Chapter 7 or 13 bankruptcy. See bankruptcy laws 11 U.S.C. § 727 & 1328. You will be required to continue payments to your former spouse during your bankruptcy case and after your discharge.

If you receive child support or alimony, you can protect that income in bankruptcy. See bankruptcy law 11 U.S.C. § 522. The entire amount that you receive for child support or alimony will be protected. Therefore, the bankruptcy trustee cannot take that income away from you.

if you are behind on child support and/or alimony obligations, filing Chapter 13 may help.  You would be required to pay all child support and alimony in full through the Chapter 13 repayment plan. However, this can be beneficial to the debtor filing bankruptcy. Including child support or alimony can reduce the amount you have to pay the banks and other creditors.

Secured Debts in Bankruptcy

The discharge removes a borrower’s personal liability on the debt. However, the discharge does not remove liens from property. If the debt is discharged in bankruptcy, the creditor may still repossess the collateral used for the loan. For instance, if a car loan is discharged the borrower will not owe the bank any money personally. However, the car loan lender can still repossess the car because it was given as collateral for the debt. See Johnson v. Homestate Bank.

The value of secured debt on personal property is determined by the replacement value of the collateral. The valuation is based on the value, as of the date of filing. See bankruptcy law 11 U.S.C. 506(a)(2).  Secured debts may be discharged but a lien will likely remain on the collateral securing the loan.

Priority Unsecured Debts

Priority unsecured debts are loans without collateral, which bankruptcy law gives special protection to. In these instances, bankruptcy law intends to protect the creditor. These loans will be paid first among all the other unsecured creditors. See bankruptcy law 11 U.S.C. § 507. Examples of priority unsecured debts are child support, alimony, taxes, and FDIC claims. Most often, priority unsecured debts will not be discharged in bankruptcy.

Bankruptcy Law Firm in the Tampa Bay Area

If you are having a difficult time meeting your financial obligations Florida Law Advisers, P.A. may be able to help. We are a customer service oriented Tampa bankruptcy law firm, committed to providing personalized attention and dedicated legal counsel. All of our initial consultations are free and convenient payment plans are always available. Regardless, if you need help with Chapter 13, Chapter 7, or other debt relief, our professional legal team will provide you with the competent legal advice you can trust. Call us now at 800 990 7763 to speak with a Tampa bankruptcy lawyer.

How To Stop A Wage Garnishment In Florida

What is a Wage Garnishment?

Garnishment occurs when a creditor takes legal action to seize a portion of your wages, bank account, or other assets. In wage garnishment cases, the creditor will contact your employer and have your employer deduct a specified amount of money from your check each week to be forwarded to the creditor. Wage garnishments can be particularly devastating to debtors (borrowers) because the writ of garnishment is continuing. Therefore, a single writ of garnishment can continue to garnish wages until the full amount of the debt is paid. Fortunately, debtors in Florida do have many legal options to prevent or stop a wage garnishment. If you are threatened with a wage garnishment or your wages are already being garnished, contact a Florida wage garnishment attorney in the Tampa Bay area for help.

How Can a Creditor Garnish My Wages?

Most creditors will not be permitted to seek a wage garnishment until they have first obtained a judgment (court order) allowing them to collect the debt. However, unpaid income taxes, court ordered child support, and student loans are the exception to this rule, they will not be required to obtain a judgment prior to seeking garnishment. Creditors will have up to 20 years to collect the funds owed under a judgment. See Florida Statute 55.081. The statute of limitations to collect on a judgment is substantially longer than most other debts. The statute of limitations on most other debts is typically only 5 years. See Florida Statute 95.11.

How Can I Stop a Florida Wage Garnishment?

If you have been notified that your wages will be garnished, you will need to act quickly. The time from the judgment until the garnishment begins can be as little as a few days. Contact a Florida Wage Garnishment Attorney as soon as possible to discuss your options and the possible exemptions you may qualify for.

Head of Household Exemption in Florida:

Under Florida Statute 222.11, if you qualify as a head of household you may be legally entitled to stop a wage garnishment. The head of a household is someone who pays at least 50% of the living expenses for a dependent. The term “dependent” in head of household cases is broad and can include many different types of situations, children are not the only type of dependent that will qualify under the law. For instance, dependent may include an aunt, uncle, parent, or even a former spouse receiving alimony. See Killian v. Lawson.
It is important to note, the head of household exemption does not protect tax refunds from garnishment. Tax refunds are not considered wages, thus they are not protected under the head of household statute.

What Are Other Exemptions That Can Stop Garnishments?

Head of household is not the only exemption that can be used to stop a garnishment. For instance, exemptions to garnishments may also include social security benefits, welfare, workers’ compensation, veterans’ benefits, pensions, life insurance benefits, and disability income benefits.

Alternatively, the debtor may be able to file a lawsuit to vacate the judgment. If the judgment is vacated, the previous court order granting the judgment to the creditor will be null and void. Whether or not vacating a judgment will be a successful option depends on the facts and circumstances of each case. If you think you may have legal grounds to vacate a judgment contact a wage garnishment lawyer for assistance.

Federal Protection From Garnishment:

Under Federal law 15 U.S.C. 1673, garnishments may not exceed 25% of a debtor’s disposable income. This protection applies to all debtors, not just those you qualify as head of household. This limit applies to the total amount of garnishments; thus, even if a debtor is facing multiple garnishments, the total garnishment may not exceed 25%. However, the garnishment may exceed 25% of the debtor’s disposable income if the disposable income exceeds 30 times the federal minimum wages per week. In these cases, the garnishment will be limited to the lesser of either 25% of the debtor’s disposable income or 30 times the federal minimum wages per week.

Procedure to Stop Wage Garnishments in Florida:

When a creditor seeks a garnishment, the clerk of the court must send notice to the debtor regarding the garnishment. The notice must inform the debtor of the garnishment and the right to file an exemption. The debtor must file any exemptions to the garnishment within 20 days of receiving the notice. See Florida Statute 77.041. Additionally, the creditor must send the debtor notice of the garnishment. The notice must be sent first class mail within 5 business days of the writ of garnishment being issued.

If the debtor timely files a claim of exemption and request for a hearing, the creditor will 14 business days from the date they are served a copy of the exemption by mail to file a sworn written statement that answers the debtor’s claim of exemption. The claim of exemption and request for a hearing is hand-delivered the creditor will only have 8 business to respond. If the creditor fails to timely respond to the debtor’s claim of exemption the court will automatically cancel the garnishment. A court hearing will not be necessary to dismiss the garnishment.

Incorrect Garnishment Judgement:

If the debtor believes that the garnishment judgment was made in error, the judgment can then be contested. It is important to hire a Florida Wage Garnishment Attorney for the best way forward, if you have already completed payments for the debt, if it was included and then discharged in a bankruptcy or if it never belonged to you in the first place.

Using Bankruptcy to Stop Garnishment:

Immediately after a Chapter 7 or Chapter 13 bankruptcy case is filed an automatic stay will be enacted. The automatic stay requires all collections efforts to immediately stop, including garnishments. The automatic stay is often the quickest way to stop a wage garnishment. Unlike filing for the head of household exemption, you do not have to wait weeks or months for a court hearing to stop the garnishment. Instead, the garnishment must be stopped as soon as the bankruptcy case is filed.

Additionally, you may be able to discharge the judgment in your bankruptcy case. The discharge is a court order releasing you from all personal liability on the debt. This is important because the head of household process does not eliminate the debt, it only temporarily stops the garnishment.

Contact a Florida Wage Garnishment Attorney Today

If you are threatened with a wage garnishment or your wages are already being garnished contact Florida Law Advisers to schedule a consultation with a Florida wage garnishment attorney. Our initial consultation is free and we offer flexible payment options. At Florida Law Advisers, we take an aggressive approach to stopping wage garnishments. We understand how devastating wage garnishments can be to a family, and we vigorously fight to defend our client’s rights. Call us today to speak with a wage garnishment lawyer, we are available to answer your calls 24/7.