Florida Bankruptcy Services - Chapter 7 Bankruptcy Petition Preparation
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Chapter 7 Bankruptcy - Basics
A permanent resident of Florida
can file bankruptcy in a Florida bankruptcy court. Florida has three
bankruptcy districts (Southern District, Middle District, and Northern
District), and each of Florida’s counties is assigned to one of the
three bankruptcy districts. You must file bankruptcy in the district
where you reside.
An important concept in both Chapter 7 and Chapter 13 bankruptcy is
“exemptions” or “exempt property.” When you file a Chapter 7 bankruptcy,
the Trustee takes all of your “non-exempt” property and sells it for the
benefit of your unsecured creditors. The Trustee cannot take your exempt
property and you may keep all of your exempt property regardless of its
value and amount.
Bankruptcy Exemptions
Florida has liberal bankruptcy exemptions, including an unlimited
homestead exemption in most cases. Only Florida residents are eligible
for Florida exemptions. If you are a Florida resident when you
file for bankruptcy it does not mean you are automatically entitled to Florida exemptions
in bankruptcy.
The state exemption law is determined by the state in which you have
been domiciled for the 730 days (two years) immediately preceding your
filing date. If you have not been a permanent resident of Florida for
the two-year period immediately preceding your bankruptcy, then your
bankruptcy exemptions will be those allowed by the state in which you
resided for 180 days immediately preceding the two year period, or the
state in which you resided for the longer portion of such 180-day
period.
A person filing bankruptcy in Florida today is eligible for the property
exemptions he could have claimed if he had filed two years ago. If this
person was a Florida resident two years ago he claims Florida
exemptions today; if two years ago he was a resident of a different
state then he is entitled to the exemptions of the state of his prior
residence.
A person who sells his residence in Georgia for $100,000 and moves
to Florida in January. In March of that year he purchases a Florida
homestead for $100,000. The person gets a Florida drivers license and
registers to vote in Florida. In March of the following year, 14 months
after becoming a Florida resident, the same person loses his job and
files bankruptcy. Under the new bankruptcy law, Georgia’s relatively
limited exemption laws would apply to this bankruptcy, and the debtor
would not have the benefit of Florida homestead protection.
Exempt and Non-Exempt Property for Florida Residents
Exempt Property
1. Homestead. Your
homestead is exempt property under Article X, Section 4 of the Florida
Constitution. This protection is afforded homestead properties situated
on one-half acre or less within a municipality and properties up to 160
acres outside a municipality. There is no dollar limitation. The
homestead exemption applies to all Florida residents. The new bankruptcy
law does not affect homestead protection for Florida residents in state
court proceedings.
The new bankruptcy law does change the homestead exemption for Florida
residents who file bankruptcy. Under the new law you can protect
unlimited equity in your homestead provided you purchased the residence
40 months or more prior to filing bankruptcy.
If you purchased your home within 40 months the new law exempts up to
$125,000 of equity. Additionally, if you injected cash in your home
within the 40 months, such as by paying down the mortgage or building a
home addition, the amount of investment made within the 40 months will
not be exempt even if you purchased the home 40 months prior to filing.
The $125,000 homestead exemption limit applies only in bankruptcy cases.
Courts have not yet decided whether a married couple filing jointly can
claim two homestead exemptions for a total homestead protection of
$250,000.
2. Statutory Exemptions Chapter 222 of the Florida Statutes
includes several categories of exempt property, including: pensions,
401K plans, tax deferred retirement plans, Social Security income,
disability income, IRAs, annuities, cash value of life insurance,
college investment plans (including 529 Plans), health savings accounts,
and hurricane savings accounts.
3. Automobile Exemption: You are allowed to exempt $1,000 of
equity in an automobile. Spouses who jointly own a car may exempt $2,000
of value in that car. If the balance of your car loan is greater than
the car value (“upside down”) then you have no car equity and your car
is protected in bankruptcy so long as you keep your car payments
current.
4. Miscellaneous personal property exemption. Each bankruptcy
debtor is allowed to exempt $1,000 ($2,000 for joint filings) of all
other personal property including furniture, cloths, tools, and
estimated cash on hand. For bankruptcy purposes the value of your
personal property is its current fair market value at a public market
such as a garage sale or flea market sale.
Non-Exempt Property
Any property which is not exempt under Florida law is included in the bankruptcy estate. The Chapter 7 Trustee may take and sell all non-exempt property and distribute the proceeds to the unsecured creditors. (You will have the opportunity to keep your non-exempt property by entering into a "buy-back" agreement with the Trustee. If you execute a buy-back agreement with the Trustee, you will make either a lump sum payment to the Trustee or make monthly installment payments over a period of several months.)
Credit Counseling
The new bankruptcy law requires that anyone who files bankruptcy must
receive credit counseling and financial education by approved providers
as a condition for filing bankruptcy and discharging debts. No one can
file bankruptcy unless they complete accredited credit counseling within
180 days of their bankruptcy filings. You are required to file a
certificate from the credit counseling agency verifying the course
completion with your bankruptcy petition. If credit counseling resulted
in a debt repayment plan, you must file a copy of the plan.
During the course of your bankruptcy you must also complete
an instruction course concerning personal financial management in order
to have your debts legally discharged. As is the case with credit
counseling, financial management courses may be provided by phone or on
line. You are responsible for the course fees.
Eligibility For Chapter 7 Bankruptcy
Under the old bankruptcy law almost any resident of the United States
could file Chapter 7 bankruptcy. The new bankruptcy law includes a
formula test, called the
means test, to determine who may (and
who may not) be eligible to file Chapter 7 bankruptcy. The means test
applies to people whose debts are primarily consumer debts, such as
credit card debts, car debt, or mortgages. Many people are forced into
bankruptcy because of a failed business or a large business related
judgment. Those people whose debts are primarily business debts are
exempt from the means test and may file Chapter 7 bankruptcy regardless
of their income and expenses.
The means test formula is designed to evaluate whether the debtor has
the financial means to pay back a substantial part of his debts in a
repayment plan through Chapter 13 bankruptcy. The means test formula
considers measures of income and allowable expenses.
If, according to
results of the formula, you do not have sufficient net monthly income to
repay debts you are eligible to file Chapter 7; if the formula says you
can repay your debts you are not eligible for Chapter 7 bankruptcy
unless you prove "special circumstances" of hardship such as a recent
job loss or medical problem. You may be eligible for relief in Chapter
13 bankruptcy.
Basic Bankruptcy Information
Secured or Unsecured
Debts. The bankruptcy petition asks you to list secured debts
separately from unsecured debts.
Unsecured debts include personal loans and credit cards
issued by banks, such as Visa, MasterCard, American Express, or
Discover, and other credit cards used to purchase consumable
items. Vehicle leases are unsecured debts.
Secured debts include those debts where the creditor
has a security interest in your property to guarantee payment.
Examples of secured debts include mortgages, car loan, loans
from finance companies (usually secured by household items),
furniture, computers or electronics. If you purchased store
goods using a store credit card, such as a card from Circuit
City, Rooms to Go, Best Buy, Rhodes, etc., the store probably
has a security interest in certain items purchased, which makes
the store a secured creditor unless you no longer have these
items or they are in poor condition.
Secured Property. After filing a Chapter 7
bankruptcy, you will have to choose to either reaffirm secured debts
or surrender the secured items to the creditor. You are entitled to
keep any secured property as long as you continue to pay the loan
for that property. If, however, you elect to surrender secured
property, the secured creditor may not thereafter recover any money
from you personally on account of that debt.
Reaffirmation
Agreements. The law requires you to execute a reaffirmation
agreement for secured personal property you want to keep. You must
sign a reaffirmation agreement within 45 days of the first meeting
with the trustee (the meeting of creditors or 341 meeting). If you
do not sign the reaffirmation agreement or redeem the property
within 45 days, the automatic stay is lifted as to that property and
the creditor is permitted to take all legal action allowable under
the law to repossess the property (if payments are not current).
Signing a reaffirmation agreement means that you will be personally
liable to pay the debts after your bankruptcy is over.
Redemption. Bankruptcy also gives you the
option to “redeem” secured personal property such as furniture,
computers, automobiles, or other property purchased on credit and
subject to a lien in favor of the lender. Redemption means
purchasing the property from the secured lender at its current
retail market value considering its age and condition. When the
current retail value is less than the amount due under the loan,
redemption can be financially beneficial.
Student Loans. Student loans are usually not dischargeable
unless you can show that your loan payments impose “undue hardship.”
In order to eliminate your student loans under the “undue hardship
exception” you must file a separate motion with the bankruptcy
court, and you must appear before the bankruptcy judge with proof of
your hardship. As a practical matter, it is very difficult to
demonstrate undue hardship unless you are physically unable to work
Reference Materials
Frequently Asked Questions
Chapter 7 Bankruptcy
Got my discharge, now what?
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