Florida Bankruptcy Facts
Bankruptcy is a federal process that helps debtors significantly lower or wipe out their financial obligations with lenders when debt becomes unmanageable. In Florida, there are a number of petitions that can be filed by both individuals and businesses who are looking to lower their debts, but it’s important to learn as much as possible about the process before making any decisions. Bankruptcy is a powerful tool that can have life-changing results for those who qualify, but if the wrong petition is chosen, debtors may end up in a worse financial position than prior to filing.
Because there are a lot of details surrounding the bankruptcy petition process, we want to make sure that all Florida debtors have a grasp of the basics of bankruptcy and have easy access to the state’s top bankruptcy lawyers who will make sure each case resolves as quickly and favorably as possible.
Below are some important facts regarding Florida bankruptcy laws as well as information on the most commonly filed petitions in The Sunshine State.
Bankruptcy Laws and Regulations in Florida
Because bankruptcy is a federal process, Florida bankruptcy laws follow the same basic regulations as other states in the United States. However, there are several differences when it comes to determining property exemptions and other factors that are unique to Florida law that debtors should be aware of before jumping into one form of bankruptcy or another.
Some debtors in Florida are under the impression that they can just apply for bankruptcy and will be granted protection from creditors. Unfortunately, it’s not that simple. Before anyone can even file a petition, the state – and nation – requires mandatory credit counseling for approval. As per the 2005 Bankruptcy Act, all debtors filing for bankruptcy on or after October 17, 2005 must undergo credit counseling in the six months immediately preceding the filing and complete a financial management course after the petition is filed.
Once these matters are taken care of, then the debtor must pass what is known as the “Means Test” to determine if they are eligible for bankruptcy protection. If the debtor’s average income for the six months prior to filing for bankruptcy is lower than the Florida average for a household of the same size, then the debtor qualifies for Chapter 7 bankruptcy protection, the most commonly filed petition in Florida.
Is Chapter 7 Right for You?
If you have already taken the Means Test and passed, then you may proceed with applying for Chapter 7 bankruptcy protection. Also known as liquidation bankruptcy, this chapter allows both individuals and businesses the opportunity to have their debts either drastically or most likely completely eliminated. The only caveat is that debtors must liquidate their assets in order to be rid of their financial obligations.
There are certain exemptions in Florida regarding what assets can and cannot be seized by creditors, but for the most part, you can rest easy knowing your home, pension plans, disability benefits, and certain personal effects valued at under $1,000. If you proceed with filing Chapter 7 liquidation in Florida, then you can expect to emerge from bankruptcy protection anywhere between 3 to 6 months with a clean financial slate.
However, if you do not like the idea of liquidating your assets or if you did not qualify for Chapter 7, there is another option – Chapter 13 bankruptcy.
The Pros and Cons of Florida Chapter 13 Bankruptcy Protection
Chapter 13 “reorganization bankruptcy” is the second-most popular petition filed by debtors in Florida. Unlike Chapter 7, only consumers may file this petition. However, it is appealing to many debtors because it does not require any assets to be liquidated. Instead, debtors are placed on a payment plan to repay creditors what they owe, lasting anywhere between 3 to 5 years. It is a significantly longer process and there are times in which a payment plan is rejected by creditors, but there is no limit to the number of times an individual can file. Anyone considering Chapter 13 in Florida should also be aware of the fact that debts are not fully eliminated with this petition, as they are with Chapter 7, although they may be significantly reduced.
Working with a Florida Bankruptcy Attorney
Because there are so many intricate details involved in filing for bankruptcy protection, it is in each debtor’s best interest to retain legal counsel. Florida bankruptcy lawyers review each detail of their client’s cases and financial history to determine the best petition for their individual situation so the best outcome for the case can be attained.