In difficult economic times many people are faced with mounting debt, while job losses or cutbacks leave them no way to meet their monthly payments. If you find yourself in this situation you may be forced to consider filing bankruptcy. Filing for bankruptcy in Florida is relatively simple. Given the state’s liberal personal property exemption laws, you can discharge some or all of your debt while still hanging onto some assets.
Filing for bankruptcy under Chapter 7 is the quickest and simplest form of bankruptcy. It is valid for both personal and business bankruptcies and is sometimes known as straight bankruptcy. Under Chapter 7, a debtor surrenders all non-exempt property to a bankruptcy trustee who liquidates the property and distributes the proceeds to creditors. In return, the debtor is granted discharge of some or all debt. Chapter 7 is used primarily to discharge unsecured debts, such as credit card debt and medical bills. It does not affect secured debts such as cars or houses and cannot be used to fight a foreclosure or repossession if you are behind in payments.
Under current bankruptcy law a filer must pass a means test to file Chapter 7. The means test is used to determine an income versus expense ratio that indicates whether you have enough disposable income to pay off a portion of your unsecured debt. The means test is a complicated calculation, but there are some basic income guidelines. In order to be considered for Chapter 7 bankruptcy in Florida a household with one person must make less than $42,468, a two-person household must make less than $53, 939, and so on. These amounts change, as laws change so be sure you know the current numbers before you file. You must be a resident of Florida for at least two years for the Florida income laws to apply. If you have been a resident for less than two years the laws of your previous state of residence apply.
Filing for bankruptcy under Chapter 13 is only for individuals with regular income or sole proprietor businesses. Under Chapter 13 a debtor retains all assets, but the court mandates a three to five year repayment plan to repay all or part of secured and unsecured debts. Debtors and creditors are bound by the terms of the repayment plan and if a debtor meets all terms at the end of the plan the debts are discharged.
Florida has very generous property exemption laws. All equity in a family home is exempt if it has been your primary residence for at least 1,215 days (3 years plus 4 months). If your current home has been your primary residence for less than 1,215 days $125,000 equity is exempt. There is a $1,000 personal property exemption and a $1,000 vehicle exemption, which is standard in most states. Also retirement accounts in the form of 401K and IRA’s and social security are generally exempt.
Debts that cannot be discharged through bankruptcy include alimony and child support, student loans, taxes or fines owed to state or federal government, debts accrued due to fraud. Also certain debts occurring within 90 days of filing bankruptcy such as large item purchases or cash advances cannot be discharged.
Florida has three bankruptcy districts. The Northern, Middle, and Southern Districts each have several cities with courts that handle bankruptcy cases. A lawyer is not required to file bankruptcy, but the paperwork and dealing with the courts may be easier with legal help. Court fees are about $300 to file bankruptcy and lawyer’s fees are about $1500 for Chapter 7 or $300 or more for Chapter 13, depending on how complicated the case is.
Federal bankruptcy law and Florida law requires debtors to complete a credit-counseling course prior to filing bankruptcy and a financial management course after filing. The courses in Florida can be taken online or over the phone. Most courses last about one hour and cost about $50. Failure to complete the courses or file proof of completion with the court can result cause delays or prevent the completion of a bankruptcy proceeding.
Florida has relatively simple bankruptcy procedures and generous exemption laws if you have been a resident for at least two years. Although the procedures are not complicated for most people it is still best to consult an attorney for help with filing the paperwork and answering any questions.