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 File Chapter 13 Bankruptcy In Florida

If you are experiencing financial hardship, Chapter 13 bankruptcy may provide some much-needed relief. Chapter 13 is when a borrower consolidates their existing debts into one monthly payment. Unlike Chapter 7 bankruptcy, borrowers will not be required to sell their assets as a condition of the bankruptcy. Instead, Chapter 13 is considered a restructuring bankruptcy because the borrower continues to make payments according to a court-approved payment plan.

With Chapter 13 bankruptcy, you can lower payments, prevent foreclosure, eliminate debt, and stop car repossession. Chapter 13 is designed to help borrowers keep their assets and eliminate debt for a fresh start. There are many advantages to Chapter 13, but there may be some disadvantages as well. Therefore, you should consult with a Tampa bankruptcy law firm before filing.

Stop Foreclosures, Garnishments, and Lawsuits

When a borrower files for bankruptcy, an automatic stay is issued. The stay goes into effect immediately after a Chapter 13 bankruptcy is filed. The automatic stay will put an immediate end to all collection activities. Therefore, all foreclosures, garnishments, lawsuits, and phone calls will stop. The automatic stay will even cancel a foreclosure sale that has already been scheduled. For more information on the automatic stay, click here.

Mortgage Modification with Chapter 13 Bankruptcy

Chapter 13 allows homeowners to force the bank to accept a 5-year payment plan for the past due amount. The homeowner won’t have to pay the full mortgage in 5 years, only the amount that is past due. You don’t need to apply for a loan modification, and you can force the bank into the 5-year payment plan.

Additionally, you can apply for a traditional loan modification as part of the Chapter 13 case. These modification applications are usually much different than when a homeowner applies. In Chapter 13 mortgage modifications, the U.S. Trustee will oversee the application. Additionally, there can be a mediator appointed as well to help streamline the process. With much more oversight, the bank is less likely to cause unnecessary delays and wrongfully deny legitimate requests.

Requirements to File Chapter 13 Bankruptcy

Only individuals who are domiciled in the United States may qualify for Chapter 13. Therefore, businesses and corporations are not eligible. Further, there are income requirements to file Chapter 13 bankruptcy as well. To qualify for Chapter 13, you must receive a regular source of income. The borrower needs to prove they have a regular and stable income, which is sufficient to pay the proposed payment plan. See 11 U.S.C. 109.

In a jointly filed case, both spouses are eligible even if only one of the debtors receive regular income. A bankruptcy court will focus primarily on the existence and stability of the regular income, rather than the source of the income. See In re Baird. For instance, regular income derived from social security, alimony, pensions, and retirement plans may all be eligible sources. See In re Hanlin

Debt Limits for Chapter 13

There are debt requirements to file Chapter 13 bankruptcy in Florida. Unsecured debts must be less than $394,725, and secured debts must be less than $1,184,200. Secured debts are loans that have collateral, such as car loans and mortgages. On the other hand, unsecured debts have no collateral. Examples of unsecured debts are medical bills and credit cards.  The amount of debt allowed changes frequently. For information on future changes, click here.

Credit Counseling Requirements to File Chapter 13

Borrowers must also attend two credit counseling courses as requirements for Chapter 13. The first course must be completed within the 180 days immediately preceding the bankruptcy filing. The briefing can be done on an individual basis or conducted in a group setting. Moreover, the briefing can take place by telephone, internet, in person, or even in your attorney’s office with your bankruptcy lawyer present. Once the course is complete, the debtor will need to file a statement of compliance with the court. Additionally, a second class may be required after your case has been filed.

Chapter 13 Payment Plan

In a Chapter 13 bankruptcy, the borrower’s goal is to obtain court approval of their proposed payment plan. Borrowers will push for payment plans that pay creditors as little as possible. On the other hand, creditors will be seeking as much money as they can. Therefore, it is essential to hire an experienced bankruptcy law firm in Tampa to protect your rights. Creditors will likely have attorneys, and it can be challenging to battle them without an attorney on your side.

When to File the Chapter 13 Bankruptcy Payment Plan

The payment plan must be filed within 14 days of filing the case. Borrowers should seek the aid of an attorney when submitting the Chapter 13 payment plan. An unsatisfactory payment plan can cause delays and unwanted consequences. The borrower must classify all debts and provide for payment of the indebtedness per bankruptcy law. Once the court confirms the payment plan, it will bind both the borrower and creditors.

What Should be Included in the Bankruptcy Payment Plan

The payment plan should outline how the income the borrower receives will be used to pay the debts owed. The allocation of payments must be feasible for both the debtor and creditor. The plan must provide for secured claims to be paid the present value of the collateral it secures. However, exceptions can be made if the creditor agrees to accept a lower amount or the debtor surrenders the property.  On the other hand, unsecured claims only receive as much as they would have received if the debtor filed for Chapter 7.

Under Chapter 13 bankruptcy law, not all unsecured claims are treated the same. For instance, the Chapter 13 bankruptcy payment plan must provide for full payment of all unsecured priority claims. Examples of priority unsecured claims include but are not limited to the following:

  • Domestic support obligations – ex. Alimony, child support, etc.
  • Administrative expenses of the bankruptcy
  • Employee wages and benefits

How Long Chapter 13 Payments Last

The Chapter 13 repayment plan can last anywhere from three-to-five years.  If your income is less than the state average income, then you will be in a three-year repayment plan. However, it can be extended up to 5 years if you cannot afford three-year monthly payments.  See Bankruptcy Law 11 U.S.C. §§ 1322.  Extending to a five-year plan would not necessarily result in you paying more money to your creditors. Often, the five-year plan just stretches out the payments to make the monthly amount less.

If your income is more than the state average income, you must be in a five-year repayment plan. A bankruptcy lawyer can provide more information on which type of payment plan may be required in your case.

Creditors Rights in Chapter 13

Creditors will likely have attorneys fighting for as much money as possible. For instance, creditors have the right to object to a borrower’s proposed payment plan. However, if the plan allocates funds in accordance with bankruptcy law, the judge must approve it, despite the creditor’s objections. Your bankruptcy lawyer should be well versed in overcoming creditors’ objections, and it is a common practice in Chapter 13 cases.

Approval of a Chapter 13 Payment Plan

If the borrower makes all the payments and satisfies the other requirements, they will be entitled to a discharge. The discharge is a permanent court order releasing the borrower from personal liability on the debt. Further, the discharge prohibits a creditor from taking any collection action against the borrower. In most cases, obtaining a discharge will be the primary reason why a borrower files for bankruptcy. However, there are many nuances of bankruptcy law that can prevent a discharge of certain debts. Therefore, it is vital to seek the aid of an experienced Chapter 13 law firm.

Waiting Periods to Refile Chapter 13 Bankruptcy

If you previously filed Chapter 7, you must wait four years from the date you received your discharge before you can file Chapter 13.  See Bankruptcy law 11 U.S.C. § 1328.  If you previously filed Chapter 13, you must wait two years from the discharge for eligibility to refile Chapter 13.

If you previously filed Chapter 13 and now want to file Chapter 7, you must wait six years from the commencement date of your previous case.  See Bankruptcy Law 11.U.S.C. §727  The “Commencement Date” is the day you filed your bankruptcy petition with the court.

Bankruptcy Law Firm in Tampa

Bankruptcy law can be very confusing, especially when it involves a Chapter 13 bankruptcy payment plan. If you are considering bankruptcy, you contact an experienced Tampa bankruptcy lawyer at Florida Law Advisers, P.A.  We are a customer-service oriented firm with a strong reputation for providing personalized attention and dedicated legal counsel. For a free, confidential initial consultation, call us today at 800 990 7763.

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.