Florida Bankruptcy Laws

Bankruptcy Laws, Statutes & Exemptions - Bankruptcy in Florida

If an American is falling behind in paying off debts and it appears that they cannot make their payments without going further into debt, then it is the right time to file bankruptcy.

For this reason, the federal government created the Bankruptcy code, bankruptcy rules of procedure, and a system of bankruptcy courts to handle bankruptcies throughout the country.

In addition to the provisions outlined in the bankruptcy code for individuals, it also gives states the authority to expand the categories of exempt assets if they choose.

The good news for Florida residents is that the state protects many assets of individuals in severe debt.

Bankruptcy Laws in Florida

Common Bankruptcy Misconceptions

The biggest misconception surrounding Florida bankruptcy law is that it gets rid of all debt.

The law is designed to help Americans, not erase debt.

A debtor is still responsible for alimony, child support, some of the most recent back taxes, most student loans, and recent large purchases of more than $550.00 for luxury goods bought within the 90 days of filing.

Additionally, a bankruptcy does not erase fine or penalties of government agencies, fraudulent debts, and cash advances of $825.00 within 70 days of filing.

As a resident in Florida, a bankruptcy is filed under chapter 7, which is known as a straight bankruptcy to wipe out all debts except those listed above, or chapter 13, which is known as a wage earner bankruptcy to set up a repayment plan to pay back debts over time.

Florida Personal Bankruptcy Means Testing

The first consideration when approaching bankruptcy is which chapter to file.

Federal law provides a means test, which determines whether an individual is eligible to file chapter 7 bankruptcies.

If the income of the person filing is below the median income for Florida, based on census data, under Florida bankruptcy law they are automatically eligible.

If a person makes more than the median income for families in Florida then the court considers the past six months along with mortgage and car payments, back taxes, child support due, and school expenses up to $1650 per year.

If, after deducting all of these amounts, and the living expenses left over meet the standards outlined by the Internal Revenue Service (IRS), a debtor can still pay at least $6000 to unsecured creditors over a five-year period, then the only option is a chapter 13 bankruptcy, under Florida bankruptcy law.

In Florida, for all cases filed after March 15, 2009, the median income for an individual is $42,468, for a family of two is $52,939, for a family of three is $60,182, and a family of four is $71,124. Individuals after that number add an additional $6,900 dollars.

Recent Changes to Florida Bankruptcy Law

In addition to the type of bankruptcy an individual chooses or is eligible for, any cases after October 17, 2005, a debtor must obtain approved credit counseling before they will be allowed to file.

In addition, the law requires that anyone filing bankruptcy must file any overdue tax returns within a short period of filing.

In a chapter 7 bankruptcy, a trustee is appointed by the court. This trustee gathers and sells any non-exempt assets in order to pay off as many creditors as possible.

However, most chapter 7 bankruptcies fall under a “no-asset” status, which means that debtors do not have anything for a trustee to sell.

Statement of Financial Affairs

In both Federal and Florida bankruptcy law, anyone filing for bankruptcy must submit a statement of financial affairs.

This document provides schedules and a detailed list of all debt including all priority debts, all secured debts, and all unsecured debts such as credit cards.

Other information required on the form is the names and addresses of all creditors, a list of all assets including real estate and all forms of personal property.

This document must be filled out completely and properly or they will not be handled by the bankruptcy case.

The Florida Bankruptcy Process

During the bankruptcy proceedings creditors are immediately prevented from trying to collect debts unless they can provide the court evidence that there is a "clause" in their agreement that will allow them to keep collecting during a bankruptcy case.

Once a chapter 7 is filed, the filer must appear in at the first "meeting of creditors" where the debtor will be questioned under oath about all debts provided.

Under law, creditors have 60 days after this meeting to convince the court that a debtor should not be allowed to get rid of debts.

During this time frame, the trustee will analyze all income to determine if anything can be paid to creditors.

As mentioned above, Federal law covers bankruptcies, but the states determine what is exempt or the person filing bankruptcy is allowed to keep.

Florida Bankruptcy Law Exemptions

Florida is a very progressive state when it comes to bankruptcy law and protects the citizens more than many other states do.

For example, Florida law allows a debtor to keep tax refunds or credits, 100% of wages for heads of family up to $500 dollars per week either unpaid or paid, prepaid medical savings account deposits, some pensions, retirement plans and life insurance proceeds, and many more.

The best advice when considering bankruptcy is to seek the counsel of an attorney to determine not only which type of bankruptcy is best, but to also get advice on the proper forms and what is needed to make the case as effective as possible.

The new 2005 Bankruptcy Law

Florida Bankruptcy Laws

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) amends the U.S. Bankruptcy Code by adding new responsibilities for debtors.

In general, the new law requires that debtors comply with their tax-filing responsibilities, make available previously filed tax returns, in many cases, and seek credit counseling services. Most BAPCPA provisions apply to cases filed on or after Oct. 17, 2005.

Contact a Florida Bankruptcy Lawyer about debtor's responsibility to find out all your legal options and rights.

Tax Returns Must Be Filed

Under the new law, if debtors fail to file a return that becomes due after the date of their bankruptcy petition, or fail to file an extension, the IRS may request the Court to order a conversion (change from Chapter 7 to Chapter 11 or from Chapter 11 to Chapter 13, for example) or dismissal of the case.

Conversion or dismissal may also be ordered if a Chapter 11 debtor fails to timely pay tax obligations owed after the date of the bankruptcy petition.

In order to have their plan confirmed, Chapter 13 debtors must also file all tax returns with the IRS for the four-year period before the bankruptcy petition. The debtor must establish filing by the first meeting of creditors.

Seven days before the first meeting of creditors, debtors must provide trustees a copy of their most recently filed federal tax return or a transcript of the return.

Similarly, copies of amendments to such returns, and any past due returns filed while the case is pending, must also be filed with the court if requested.

The returns or transcripts must be provided to the court at the same time they are filed with the IRS.

If the returns or transcripts are not filed, a Chapter 7 discharge will not be granted, or a Chapter 11 or 13 plan will not be confirmed.

In addition, debtors must also provide a copy of the tax return or transcript to requesting creditors.

Contact a Florida bankruptcy lawyer about debtor's responsibility to find out all your legal options and rights.

Means Testing for Chapter 13

Under the new law, individual debtors who meet certain income tests will be required to make regular payments on their debts under a Chapter 13 plan.

The new law also authorizes the bankruptcy courts to modify IRS expense standards and use them to make this “means test.”

Expense standards published on this Web site are used for tax-administration purposes only and may differ from those established by the bankruptcy courts.

Inquiries about standards for means testing should be directed to the local office of the United States Trustee (Department of Justice).

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