Florida allows a complete exemption for one’s homestead property – up to one half acre in an incorporated municipality and up to 130 acres if the property is not in an incorporated municipality.  While the Federal law respects this, there are exceptions.

In order to qualify for your state’s exemption, you must have made that state your permanent residence for at least two years.  If less than two years but more than 91 days, you must use the exemptions of the state where you were domiciled for the better part of the 180 day period immediately prior to the two year period.

Even if you qualify, Federal law now puts a restriction on the amount of an exemption for homestead property.

1. If you acquired your Florida home less than 1215 days prior to filing, then you are limited to a homestead exemption of $136,875, regardless of the value of the house.
2. You are also limited to this $136,875 if you were convicted of a felony under circumstances which demonstrate that the filing of the case was an abuse, or if the debtor owes a debt arising from a violation of Federal or State securities laws or regulations, or if the  debtor owes a debt arising from fraud, deceit or manipulation in a financial capacity with regard to the purchase or sale of a security, or a criminal act, intentional tort, or willful or reckless misconduct which caused serious physical injury or death to another individual in the preceding five years.
   1. Exception to this exception – this does not apply to the extent that the interest in the property is reasonably necessary for the support of the debtor or a dependent of the debtor

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Notwithstanding Florida’s opting to use its own bankruptcy exemptions, it allows debtors to avail themselves of the federal bankruptcy exemption for:

1. Social Security benefits, unemployment compensation or local public assistance benefits
2. Veteran’s benefits
3. Disability, illness or unemployment benefit
4. Alimony, support or separate maintenance to the extent reasonably necessary for the support of the debtor or any dependant of the debtor.
5. Payment under stock bonus, pension profit sharing, annuity or similar plan or contract on account of illness, disability, death, age or length of service to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

If you are a homeowner, and you qualify to utilize Florida’s bankruptcy exemptions, this state has some of the most generous exemptions for a homeowner.  Subject to certain Federal Bankruptcy law limitations, you are entitled to all of the equity in your home.

Florida law also has the following additional exemptions:

$1,000 equity in a single motor vehicle (Fla. St. 222.25(1),

Debtor’s interest in professionally prescribed health aids. (Fl. St. 222.25(2)

The cash surrender value of life insurance policies and the proceeds of annuity contracts are exempt (except where the policy or contract was made for the benefit of a creditor.   Fl. St. 222.14

Disability income benefits  are exempt. Fl. St. 222.18

There is also a general wildcard $1,000 exemption provided by the homestead provisions of the Florida Constitution.  If a person does not claim a homestead exemption for a house, Florida law gives you a $4,000 wildcard exemption.  Fl. St. 222.25(4).

Under Fl. St. 222.11, the first $750 of disposable earnings of the wages of the head of household are exempt.  Wages in excess are also exempt unless the wage earner agreed in writing and the language of the writing is very specific.  For those who are not the head of household, wages may be garnished, but are subject to the federal Consumer Credit Protection Act. 

Florida opt out does allow for certain exemptions under Federal bankruptcy law.

Along with the required bankruptcy forms you will need to submit the following paperwork:

• A certificate showing that you completed a credit counseling workshop within 180 days
• Your most recent Federal tax return
• Wage Stubs for the last 60 days

These documents are crucial to have for filing bankruptcy. Otherwise there can be serious consequences. There are exceptions to the rule, from time to time the court will grant an exception for counseling within the past 180 days if they determine you to have a physical disability prohibiting you to be able to attend, mental incapacity or active duty in a military combat zone. Otherwise if you fail to get the required financial counseling your case could be stricken and dismissed from the courts.

Ensuring you have the right bankruptcy forms for filing bankruptcy in Florida and completing the appropriate requirements prior to filing will help the bankruptcy process be smoother for you. Otherwise you risk having your bankruptcy dismissed by the courts.

Hiring a bankruptcy attorney in Florida who is familiar with the current law and forms will ensure you are properly educated during the process and have the appropriate time frame for filing bankruptcy.

Experts in the field such as bankruptcy attorneys are great resources and guides to ensure you are making the right decision for your situation. Each situation has unique variables, understanding what yours are, is crucial when filing for bankruptcy. Understanding that this is a period of time in life and this is not the rest of your life also plays an important role to ensuring you make the best decision based on what your circumstances are in life. Because it is an emotional time for you and others involved, having the right advice and guidance allows you the peace of mind to know you are choosing the right option.

Although you may feel very alone understand that bankruptcy is a choice of freedom in many cases. There are a few things that will help you let go of the emotional side of bankruptcy to clear your mind and make honest, clear decisions.

1. Talk it through with your spouse: Make sure you and your family are on the same page during this journey together.
2. Hire the right attorney for you and your situation: Hiring someone you don’t feel comfortable with or cannot connect with will only hinder your decisions.
3. Decide to make lifestyle changes: Sometimes this is the hardest step, but choosing to change your decision making process will ensure success after bankruptcy, these changes can be as small as deciding to eat in every night of the week except one or choosing not to buy the new outfit when you don’t have the money in the bank for it.
4. Find Support: Look to others who have filed for bankruptcy and find support with them to help you through this time. People who have already gone through the process or who are going through the process will aid you in not getting too emotional during the progression.

Keeping a good frame of mind, getting the right advice for you and your situation and finding support for your decision will help to make filing bankruptcy a much smoother process.

Eight Duties of The Trustee
According to the federal bankruptcy code, the Trustee has the following responsibilities:

1. Gather and liquidate any non-exempt property – cars, boats, real estate other than a homestead, cash, and personal belongings – that is part of the bankruptcy estate.
2. Ensure all property in the bankruptcy estate is accounted for.
3. Review the debtor’s financial records for any mistakes or misinformation.
4. Examine all proofs of claims against the bankruptcy estate and dismiss any invalid claims.
5. Respond to creditors’ questions, issues and concerns.
6. Execute the bankruptcy estate as quickly and efficiently as possible.
7. Oppose discharge of any of a debtor’s debts that don’t qualify for discharge
   (e.g., tax liens, student loans and back alimony payments).
8. File a final accounting and report about the bankruptcy estate with the court and U.S. Trustee who oversees the regional jurisdiction (Florida is in Region 21).

More information about the U.S. Trustee Program and federal bankruptcy law in general, visit http://www.justice.gov/ust/index.htm

After deciding to file bankruptcy, many people are understandably anxious to have their attorneys file their petitions quickly and get done with it. However, timing is important, as your attorney should advise you. That’s because you want to make the most of your bankruptcy relief.

Three Keys to Proper Bankruptcy Timing
Deciding when to file a Chapter 7 bankruptcy depends on your circumstances:

• A delayed filing can help you benefit from a future exemption or take advantage of an anticipated bonus or tax refund. You can then spend it by making house repairs or stocking up on food and other household goods that won’t become part of your bankruptcy estate and the court won’t question.  Also, because the trustee will review your records for the past year and look for any preferential payments – payments deemed to be attempts to minimize your bankruptcy estate – it can be wise to delay filing for a few months so any such payment (or apparent payment) can age longer.
•  A fast filing can help keep creditors from foreclosing or seizing property. Filing creates an automatic stay of foreclosure proceedings until the bankruptcy is complete.
• Tax issues such as liens should be cleared if at all possible, so they don’t make filing bankruptcy more complex. Tax liabilities are generally not dis-chargeable debts. Discussed this with your attorney.

Other factors can come into play in deciding the timing of a bankruptcy. If a debtor’s in the middle of a divorce, bankruptcy can stop activities related to the settlement. If other litigation is pending or in progress, bankruptcy can affect where and how the matter is decided. Filing sooner rather than later could put the litigation issue in federal court instead of state court. Conversely, filing later could keep the legal matter in the state court where the debtor might get a more favorable ruling

1. Avoid making any big financial or life changes for three months, if other life issues don’t force doing so. It’s especially important not to incur new loan liabilities that may lead to another creditor quagmire. Also, try not to change addresses as that can affect your apparent creditworthiness.
2. Get a full credit report to have a complete loan history in hand while rebuilding your credit.  AnnualCreditReport.com is a free service of the big three credit bureaus – Equifax, Experian and TransUnion – offering consumers credit reports once a year. (Delinquent loans stay on credit reports for seven years from the late payment date, while a bankruptcy stays 10 years.)
3. Correct any credit history errors you find. This may seem pointless after bankruptcy, but if a credit bureau can’t verify disputed information fin 30 days, it has to remove the item from your history. Also, you’ll know your credit history, so you can explain anything major to potential employers, landlords or new creditors.
4. Get a new credit card (in some cases). To book a hotel room, rent a car or make online purchases, you need a credit card – but just one. That’s why some bankruptcy filers keep a credit card with little or no balance out of their bankruptcy filing. Post-bankruptcy, you can get a bank credit card by securing its credit limit by depositing the same amount in a savings account. And because a Chapter 7 bankruptcy can only be filed every six years, some credit card companies will take a chance issuing unsecured credit cards but with very high interest rates.

5. Pay your bills on time. This obvious step is the most important. This includes all bills: Your mortgage or rent, utilities, car payment and any new credit lines. After a year of consistent, timely payments, your credit score will climb out of the depths. After four years of paying bills on time, your credit rating may qualify for a mortgage.

Rebuilding Credit Takes Time After Bankruptcy
It takes time for bankruptcy situations to develop and time to emerge from them. If “buy now, pay later” got you into bankruptcy, get counseling if you can’t change that thinking yourself. If unfortunate circumstances were the cause, do your best to resolve them with minimal spending.

Florida, An Advantageous Bankruptcy State
In Florida, the two key Chapter 7 exemptions are a debtor’s primary (homestead) residence and retirement assets. Because these two assets often comprise most of a debtor’s net worth, Florida is considered an advantageous place to file a Chapter 7 bankruptcy.

However, Florida only exempts $4,000 in personal property (or $1,000, if claiming a primary homestead residence) and $1,000 per vehicle.  That means that any amount of personal property – cars, boats, furniture, jewelry and so on – and vehicle equity in excess of these limits gives the debtor two choices:

1. To “buy back” the amount of property in excess of the exemption limits from the trustee (by presenting a bank cheque made out to the trustee); or
2. To choose to forfeit to the trustee the personal property in excess of the exemption limits

Bankruptcy Trustee Incentives
Bankruptcy trustees are paid a nominal $60 fee to oversee a Chapter 7 bankruptcy. So where’s the incentive to do the work they do? They can keep a percentage of whatever they recover for the creditors. That can motivate them, especially on large bankruptcies, to get as much as possible for creditors from property in excess of exemption limits.

Advance Bankruptcy Planning Is Important
When considering a Chapter 7 bankruptcy, it’s critically important for debtors to do advance planning  ahead of the initial filing.

Thinking through their exemptions can help them position their personal property more advantageously. At the same time, they should seek legal counsel to ensure they do not jeopardize their Chapter 7 bankruptcy’s outcome. That’s because the trustee can go back months and sometimes years to determine if exempt property is non-exempt.

1. Chapter 7 is the easiest form of bankruptcy. It offers absolute relief from creditors of most unsecured debts such as credit cards and secured debts (although discharged secured debts may result in the forfeit of any collateral or deposits). Some debts such as certain tax liabilities and liens, most student loans, alimony and child support  cannot be discharged through any form of bankruptcy.
2. As soon as a Chapter 7 bankruptcy is filed, creditors must stop collection efforts by mail, phone or other means. Plus, it stops any property repossession activities by creditors, such as foreclosure or vehicle repossession.
3. Most creditors won’t show at a “meeting of creditors” before the Bankruptcy Trustee, even though the debtor must. This keeps the meeting simple and quick.
4. Florida’s Chapter 7 exemptions include the debtor’s primary home and retirement assets, both which generally make up the bulk of the debtor’s assets.

Chapter 7 Bankruptcy Offers Debtor Flexibility
Depending on your situation – subject to what’s called “means testing” – you can likely qualify for a Chapter 7 debt liquidation. If you don’t qualify, you may qualify for a Chapter 13 repayment bankruptcy. Conversely, a Chapter 13 bankruptcy can be changed to a Chapter 7 bankruptcy if a debtor’s circumstances change and the judge approves.

Top Three Reasons for Bankruptcies
Bad things happen to good people every day, leading many into filing for bankruptcy. In the past two years’ economic downturn, the numbers of those seeking bankruptcy protection have soared. Since the U.S. Bankruptcy Abuse Prevention and Consumer Protection Act was enacted in 2005, total bankruptcy filings were a record 1.6 million in 2010.

The top three reasons:

1. 1.    Medical catastrophes, accounting for about 50% of all consumer bankruptcies
2. 2.    Job losses, causing the unemployed to tap out their credit lines for living expenses
3. 3.    Divorces, dividing what was once combined household income and possibly assigning debt(s) to one or the other spouse who cannot afford to pay on one income alone

Point is, most consumer bankruptcies are not due to reckless spending, but life’s curve balls. And there’s certainly no moral stigma. Companies file bankruptcies all the time. Even General Motors did so in 2009.

Bankruptcy Chapter-By-Chapter
Bankruptcies are filed in U.S. Federal Court, which assigns a bankruptcy trustee to oversee the case. Within the Federal framework, states can exempt (or shield) certain types of assets from inclusion in a bankruptcy. In Florida, primary homes and retirement assets are exempt. Three main types of bankruptcies exist:

• ·         Chapter 7, which comprises most consumer bankruptcies and eliminates most debts, except tax liens, student loans, alimony, among chief examples. It can be filed only once in a six-year period.
• ·         Chapter 11, which permits corporations to continue operating but under a court-approved reorganization plan.
• ·         Chapter 13, which allows debtors to keep their assets and establish a creditor repayment plan.

Future blog postings will go deeper into the bankruptcy process, especially Chapter 7, and how to rebuild credit quickly.