Florida Bankruptcy Law
Bankruptcy is an option that often has to be used when individuals or businesses are incapable of paying their debts to their respective creditors. Bankruptcy can be a major financial burden to an individual or a business, but knowing some important aspects of bankruptcy can help make your debt burden easier to manage and can help you stay away from hassles in the near future.
One of the main things to pay attention to while filing for bankruptcy is the type of bankruptcy options available. It is upto you to decide which suits you and your financial condition the best:
Chapter 11 Bankruptcy usually used for bankruptcies in business, it is not normally pursued by individual consumers, as it is quite complex and expensive to do so. It permits businesses to restructure themselves, which gives them an opportunity to handle their debts and get out of some burdensome contracts and deals. Thus, the businesses are allowed to function normally, but only under the supervision of the Bankruptcy Court.
Chapter 7 Bankruptcy this bankruptcy option is the most frequently used by individuals. It involves the complete liquidation of the debtors assets to pay the creditors and wipes out the remaining debts, which gives the debtor a clean start. This is how it goes about - the trustee sells the assets and the net proceeds of the liquidation are distributed to the creditors. However, the debtor can hold on to certain property that is exempt (property protected by law, therefore cannot be confiscated or taken away). Then again, the property or assets that can be exempted depends on the state as each state has its own exemption laws.
Chapter 13 Bankruptcy under this chapter, the debtor is allowed to make his overdue payments over a proposed period of 3-5 years, where he pays the creditors all or part of his debts from his future income. Sometimes the equity in some secured assets (for example home or car) is more then the exemptions can protect. In such cases, a chapter 13 seems to be the best as it helps in preventing house foreclosures and even in making up missed car or mortgage payments. Also, when a debtor has some valuable non-exempted property that he wants to keep, this bankruptcy option is a better idea. But to file Chapter 13 bankruptcy, it is required that the debtor has a regular source of income so that he can pay off his debts to the creditor according to the repayment plan.
Like other US states, Florida has its own list of exemptions too. This meaning that there are some assets, within a certain exemption limit (An exemption limit applies to any equity you have in the property. Equity is the difference between the value of the property and what is owed on the property. For instance, an automobile valued at $5000 with a loan of $4500 has an equity value of $500), that you can protect from creditors when you file bankruptcy in Florida. You will be able to keep these exempted possessions even after you file bankruptcy. For married couples filing together, the bankruptcy law allows each of them to claim a full set of exemptions, unless otherwise noted. To keep any property that is not exempted, a debtor must generally pay the trustee the value of that particular property.
Homestead exemptions:
- Real or personal property (including mobile or modular homes) to an unlimited worth, with the property not exceeding half an acre (if in the city) or 160 contiguous acres (if in rural land)
- Property thats rented or leased by the entirety can be exempt as well
Insurance exemptions:
• Disability or illness benefits
• Life insurance cash surrender value
• Death benefits, which are payable to a particular beneficiary and not the deceaseds estate
Pension exemptions:
• County officers or employees
• Firefighters
• Highway patrol officers
• Police officers
• State officers or employees
• Teachers
Personal property exemptions:
• Up to $1000 for any personal property (husband & wife may double)
• Up to $1000 for a motor vehicle
• Health aids
Public benefits exemptions:
• Compensation for crime victims
• Compensation to employees for injuries in hazardous jobs
• Unemployment compensation as well as workers compensation
• Social security
• Veterans benefits
Wildcard exemptions:
• Using the Wildcard exemption, you can protect any type of personal property up to $1000
For debtors who think filing bankruptcy is too much for them to handle and they are in no way prepared for it, there are other options available as well. The most basic option is to get in touch with your creditors and try to work out a payment plan of some sort. Try explaining your situation and why you cannot make your payments and suggest a new arrangement. Other options include taking a debt consolidation loan or going with a consumer credit counseling plan. The availability and usefulness of these options depend on your employment (or income) status and the type of assets you have:
Debt consolidation loan this is a loan given to debtors by a consolidation company so that they can pay off their unsecured debts (like credit card debt, medical bills, personal loans and certain installment loans). This is how the process goes about - you just have to make monthly payments to the consolidation company and they take care of your debts with creditors by fixing a monthly-consolidated payment, which is determined by the lowest payment amount that is acceptable to your creditors. And the company you have hired will also distribute that amount to the creditors. But think carefully before doing this, as these loans require your home as collateral. If you dont make payments on time or dont make them at all you could lose your home.
Consumer Credit Counseling Plan this plan works by the debtors entering a debt repayment plan, by which the creditors may agree to lower their interest rates and accept reduced payments. Usually in these plans, you deposit money each month with a credit counseling service. These deposits are used to pay off your creditors according to a payment plan that is developed by the counselor. But as a part of the repayment plan, you may have to agree to not apply for or use any additional credit while you are participating in this program. A successful repayment plan requires you to make payments regularly on time.
The new florida bankruptcy law, which went into action from October 17, 2005, has made filing bankruptcy more complex. It has made the process longer, more expensive and certainly harder for consumers who want to get rid of their debts. According to the new Florida bankruptcy law, the Florida exemption law is applicable to your bankruptcy only if you have resided in Florida for at least 730 days (2 years) prior to the filing date. If not, your bankruptcy exemptions will be those allowed by the state where you resided before moving to Florida. Among the many changes, one significant change is that the debtor now has to take a complicated means test, which determines whether he can use a Chapter 7 filing or be forced to file a Chapter 13.
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