Guide to Filing Bankruptcy in Southwest Florida
—From the Debtor’s Perspective—
What Can I Expect? What is the Process?
Which Chapter Should I Choose?
What is the Best Strategy?
Life After Bankruptcy
Christopher D. Smith
Attorney at Law
If you do not have any assets to be liquidated or repurchased from your trustee, your debts should be discharged and your case should close about 3 months after your Creditors’ Meeting. However, this time period may be extended should there be an adversary action filed.
Generally, if your trustee files a Report of No Distribution in the days following your Creditors’ Meeting, this is a good sign that your trustee does not expect to administer an estate. However, those reports can be withdrawn if assets are later discovered.
Usually, your trustee will be in contact with your attorney to stipulate to the repurchase of your non-exempt assets. Many times this will include cars, boats or timeshares that are owned outright. The trustee has the legal authority to order an appraisal of your personal belongings to determine the value. This is likely if you live in an above-average size house or scheduled substantial personal belongings in your petition. However, your trustee will never just take your items without telling you or without first trying to arrange for you to “buy back" the property. Most buy-backs result in a repayment plan between 6 months and 1 year. If you do not elect to do a buy-back, you will have to surrender your non-exempt property to your trustee’s auctioneer.
Remember, your tax refund for the next year is an asset, and you should not spend that refund until your attorney or trustee tells you it is okay, or until your case closes. Many debtors are alarmed to learn that they will have to surrender all or part of their refund to their trustee after they already spent the money.
Your case cannot close until after you have completed your repurchase. Plus, once you have paid the full amount, there will still be an accounting period of about six months where the Trustee produces an accounting for approval by the US Trustee and the Court. You are not involved in this process, but you will receive notice in the mail.
Your trustee has broad discretion to pursue your non-exempt assets. If your trustee should determine months into your case that you neglected to list a valuable non-exempt asset, your trustee can still take that asset. Even if your case closes, in most circumstances a trustee can re-open a case to administer a concealed asset, so the authority of your trustee should not be underestimated.
Even if your case has assets that you repurchase, you can still face an adversary action that could impact your discharge. Further, if your income is high enough to fund a reasonable Chapter 13 plan, the US Trustee can file to dismiss or convert your case.
Not usually. When the trustee files an objection to your exemptions, in most cases your trustee is merely objecting to the valuations that you have assigned to your property, and thus reserving the right to later appraise and sell that property (usually back to you). Although there are exceptions, these objections are usually ministerial and are very common in Tampa and Ft. Myers, so much so that our judges sustain the objection automatically and without a hearing. If your trustee files an objection to something other than valuation, then you should take it more seriously.
A common misconception people have is that when they file for a Chapter 7 bankruptcy, all of their household items are taken from them. This is not the case, except in very rare, extreme cases. Typically, about a week after your 341 Meeting, the trustee may have a personal property appraiser set up a time and date to be let into your home to conduct an appraisal of your personal belongings. You must cooperate with the appraiser or face the ire of the judge and trustee. A week or so after the appraisal has been completed, the appraiser will supply your trustee with a copy of this appraisal. These appraisal figures are usually the basis for determining the amount of non-exempt property that you have, for purposes of setting a buy back sum from your trustee.
A Reaffirmation Agreement is an agreement between you and a particular creditor that prevents a particular debt from being discharged. This is common with vehicle loans. Most vehicle lenders will require that you sign a reaffirmation agreement as a condition for letting you keep a car after bankruptcy. When considering whether to sign a reaffirmation agreement, it is important to determine if you can afford the payments in the future on that loan. Once your case is closed, if you fail to make the payments on the loan, the creditor can repossess and hold you personally liable for any deficiency (the difference between what they sell the collateral for and what you currently owe on the loan). Reaffirmations are disfavored by the Court unless the debtor is realizing a significant benefit from the debt, since these agreements work against the central purpose of bankruptcy by saddling the debtor with debt after the case.
After your 341 Creditors’ Meeting, your Chapter 13 trustee will issue either a favorable or unfavorable recommendation. Don’t be alarmed, but most of the time they issue an unfavorable recommendation, and it is not usually a major problem so do not panic. In the majority of cases, the unfavorable recommendation simply means that your trustee may want something amended in your petition or plan, or that he needs more information or documents regarding your case. It does not mean your case was rejected or that it was not approved… it just means some follow-up is needed. If you get a favorable recommendation, that is obviously good news. It is very rare to get favorable recommendations in the Ft. Myers Division, but more common in the Tampa Division.
After your Creditors’ Meeting, you will have a confirmation hearing before your judge. In almost every case, the Debtor does not need to attend this hearing. Further, in almost every case, the initial confirmation hearing is continued to a later date, between 2 and 8 months later. The second confirmation hearing is called the “continued confirmation hearing," and this is an important hearing where the judge either dismisses your case or confirms your plan. Very rarely would you ever have to attend the continued confirmation hearing. Most of the time, your attorney will not even attend this hearing unless there are unresolved issues in your case or pending creditor objections.
Once the plan is confirmed by the Court, your plan binds all the parties involved in your case. This means that the creditors must accept the payments provided and your payments over the life of the plan are fixed, unless you experience a change in circumstances that significantly increase or decrease your income. The trustee will reserve the right to increase your plan payments if your income increases during the plan, but this is rare. Your trustee will see your income because he will be provided a copy of your tax return every year while in the plan, and sometimes (often) he will require you to turn over any income tax refund.