Rule #1 - Tell the truth.
Bankruptcy is for the “honest but unfortunate debtor”. Most debtors are “insolvent” meaning they cannot pay their bills timely and therefore, have met the “unfortunate part” of the bankruptcy code. A debtor must also meet the honest part. Please be honest, truthful, and diligent when disclosing all assets, liabilities, debts, lawsuits, or other relevant financial information. The United States Trustee will scrutinize your tax returns for the past two (2) years, up to twelve months of bank statements, credit reports, credit card statements from the past year, and any other relevant financial information. A debtor must give full and fair disclosure of all assets and all liabilities to the trustee to receive a bankruptcy discharge. Trustee may liquidate non-exempt property and use the proceeds to pay creditors. If creditors are paid, priority debt such as taxes are paid first. Any unsecured debt is paid in proportion to what’s claimed. Individuals with primarily consumer debt, must pass a “Means Test”. The means test determines whether you can file a Chapter 7 or must consider filing a Chapter 13 based on your total household income. You can file a Chapter 7 only once every eight years. If you are married, you can file with or without your spouse. Regardless of whether or not your filing with your spouse, household total income is considered when determining if you qualify for a Chapter 7 bankruptcy.
Can I have two bankruptcies pending at once?
No. You must choose which Chapter to file and can only have one bankruptcy pending at a time.
Florida bankruptcy exemption laws protect property in bankruptcy and are essential to a fresh start. When you file, the Florida bankruptcy exemptions will let you keep what you need to work and live. However, exemptions protect essential assets only, not unnecessary luxury goods.
To prevent a costly property loss, you’ll want to understand the exemptions available under Florida, and what happens to property you can’t protect with an exemption. Bankruptcy is a federal process that works the same way in every state. However, you’ll use Florida state laws known as “bankruptcy exemptions” and federal nonbankrupt exemptions to protect your property. Federal bankruptcy exemptions aren’t available in Florida.
Below, you’ll find more Florida exemptions. However, it’s not an exhaustive list. Also, as with all laws, exemption laws can change. Be sure to check for current amounts and read the statute for qualification requirements (we haven’t included them here).
Florida Public Benefits
- 222.25(3) – Earned income tax credit.
- 222.201 – Public assistance and Social Security.
- 222.201; 443.051(2),(3) – Reemployment assistance.
- 222.201; 744.626 – Veterans’ benefits.
- 440.22 – Workers’ compensation.
- 960.14 – Crime victims’ compensation.
Florida Insurance Exemptions
- 112.363(9) – Public employee health insurance.
- 222.13 – Death benefits payable to a specific beneficiary.
- 222.14 – Annuity contract proceeds excluding lottery winnings; life insurance cash surrender value.
- 222.18 – Disability or illness benefits.
- 632.619 – Fraternal benefit society benefits.
Other Florida Exemptions
- 222.11 – For the head of the family, 100% of earnings up to $750 per week; more than $750 per week or non-head of household, greater of 75% or 30 times federal minimum wage.
- 222.21 – Federal government employees’ pension payments needed for support.
- 222.201 – Alimony, child support needed for support.
- 620.8307 – Business partnership property.
- 769.05 – Damages to employees for injuries incurred in hazardous occupations.
What Are the Florida Bankruptcy Exemption Timing Rules ?
It’s tempting to move to a state with significantly more generous bankruptcy exemptions when filing for bankruptcy. But it doesn’t work that way. To prevent people from abusing the system, filers must live in the state for at least two years. Otherwise, they must use the previous state’s exemptions. Here’s how it works.
- If you’ve made your permanent home (your “domicile”) in your current state for at least two years, you can use the state’s exemptions (or the federal exemptions if allowed).
- If your domicile hasn’t been in the same state for two years, the rules get more complicated, so prepare yourself. It sounds so strange we’ll explain it in three different ways so that you know you didn’t read it wrong. Here goes: You’ll choose the state you lived in the longest during the 180 days immediately before the two years before filing.
Did you get that? If not, here’s a way to figure it out. Count back two-and-a-half years. Then ask yourself where you lived the longest during the first six months of that two-and-a-half-year period.
Special Homestead Exemption Rules – The homestead exemption protects your ownership interest in your home. You’ll need to read your state’s homestead statute to determine the specifics, such as the amount of equity and acreage covered, whether the exemption protects a manufactured home, and if you need to file a homestead exemption with the county clerk. But in all states, the property must be your residence. Also, you’ll need to comply with a federal timing law. Here’s the rule:
You must live in the home for over 40 months before filing for bankruptcy. Otherwise, your homestead exemption is capped at $189,050 if you file on or after April 1, 2022 (the amount changes every three years). This cap won’t apply if you bought your home with home sales proceeds from that state.
What Happens to Property You Can't Exempt in a Florida Bankruptcy?
It will depend on the chapter you file. In Chapter 7 bankruptcy, you lose property not covered by an exemption. The trustee responsible for managing your case will sell the property for the benefit of your creditors.
In Chapter 13 bankruptcy, you can keep all your property. However, that luxury comes at a price. You’ll pay your creditors the value of any property not covered by an exemption in your Chapter 13 repayment plan.
How Do You Protect a Financed Home or Car in a Florida Bankruptcy?
Many wonder if they can wipe out a home mortgage or car loan and keep the property without paying for it. The simple answer is “No.” If you still owe a balance on your mortgage or car loan, you must pay as agreed to prevent the lender from foreclosing or repossessing the property. Why? Because when you purchased it, you gave the lender a property lien. The lien created a secured loan, allowing the lender to take back the property if you don’t pay as agreed, even in bankruptcy.
Chapter 7 doesn’t have a mechanism that will allow you to catch up on a mortgage or car payment over time. So, the mortgage or car payment must be current. You’ll lose the property if you’re behind on the payment and file for Chapter 7. The lender will ask the bankruptcy court to allow the lender to proceed with foreclosure or repossession during the bankruptcy or wait until Chapter 7 ends.
You don’t lose property in Chapter 13. However, before the bankruptcy judge approves or “confirms” your plan, you must prove you earn enough to make the monthly payment and pay the late payments by the end of the three-to-five-year plan. Some filers can pay less on financed property if they qualify to reduce an auto loan to the car’s value or strip a junior mortgage, credit line, or lien from a home.
What if I am an immigrant?
Immigration is now looking at 46 different factors to determine if an immigrant is self-sufficient and will not become a public charge to the U.S. in the future. Bankruptcy may be a factor. To pass the public charge test, the immigrant must have more positive factors than negative factors. It’s important that if a person on a visa or undocumented is wanting to file bankruptcy, advise them to speak with an immigration attorney first.
What happens to co-signers of loans and credit cards?
Unless the co-signer has filed bankruptcy as well, they remain liable for the debt. Your filing for bankruptcy has no effect on their liability.
Should I buy a new car before I file?
Do not incur more debt, buy new/used cars, get loans shortly before you file for bankruptcy.