Bankruptcy is always an extremely difficult and stressful experience to go through, regardless of where you live.  However Florida, like every state, has specific legal guidelines that govern the process.  New bankruptcy law has also created some concern among debtors that they have few rights.  This article will touch on those concerns.

Any resident or business within the United States can file a Chapter 7.  The financial condition of filers is analyzed using a means test that places income against expenses to determine eligibility for Chapter 7. 

What Will Happen When I File?

The way Chapter 7 essentially works is that all of the debtor’s eligible assets (those not exempt from liquidation by law) are turned over by the court for liquidation.  This can include extra vehicles, jet skis, motorcycles, boats, or other luxuries unrelated to earning a living.  All proceeds from those sales go toward paying off unsecured debts such as medical bills and credit cards.

Will I Lose My Car and My House?

Filing a Chapter 7 bankruptcy doesn’t mean that all of your debts will be “wiped clean”.  It only serves to eliminate unsecured debt through liquidating assets.  You are still financially responsible for making car payments and mortgage payments.  If these payments are not made in a timely manner, the creditors who issued the secured loan still have the right to repossess the vehicle, or foreclose on the home. 

This means that Chapter 7 bankruptcy is a solution for individuals who have accumulated too much unsecured debt and lack the income to support it.  Without the payments toward unsecured debt, these individuals my likely be able to afford to make mortgage and car payments, and this is where Chapter 7 bankruptcy can save a family.  The elimination of unsecured debts allows income to be applied only to secured debts, and can help a family avoid facing foreclosure by making timely payments on that debt.

What if I Don’t Qualify for Chapter 7?

Even if your income is so high that you fail the means test for Chapter 7, you may still be eligible for Chapter 13 bankruptcy.

Chapter 13 is a court appointed plan available to individuals (but not businesses) to repay all, or sometimes part, of your debt.  Unlike Chapter 7, debts are not dissolved or eliminated – instead the court defines a payment plan that the debtor can afford, and the creditor must agree.  Chapter 13 is most often used to avoid foreclosure or to establish a payment plan with the IRS for unpaid taxes.

Florida-Specific Bankruptcy Statutes

Anyone filing bankruptcy in Florida falls under the jurisdiction of the state’s bankruptcy laws.  While similar to most other states, there are some different statutes in Florida.  For example, Florida only allows filers to claim exemptions on assets if they’ve lived in Florida for at least two years.  Otherwise, the exemptions apply from the state where you lived previously, or federal exemptions.  Most people prefer Florida’s more liberal asset exemptions because more assets are generally protected from the bankruptcy liquidation process.

Making it Through Bankruptcy

Bankruptcy can be a disconcerting process, and many people feel ashamed of being in such a predicament.  However, bankruptcy can happen to the best of us, especially when there are unforeseen circumstances.

If you find yourself in a financial situation where it feels like there’s no way out, bankruptcy may be a viable option.  Make sure to obtain a good bankruptcy attorney who will work for a reasonable fee.  Also keep in mind that if you are filing a Chapter 13, often attorney fees will be rolled into the court-appointed payment plan – making using an attorney to navigate the complicated process much more affordable.