If you are experiencing significant financial distress and are no longer able to afford your bills, the best option for resolving your debts may be bankruptcy. There is no shame in filing for bankruptcy. Bankruptcy is a right afforded every person to obtain a fresh start after falling into a financial situation they cannot get out of on their own.
Although bankruptcy is generally a matter of federal law, federal bankruptcy courts sometimes look to state law in resolving certain issues, such as exemptions or property rights.
Although the federal bankruptcy code provides a default means for resolving these issues, federal law allows a given state to opt out and instead apply state law exemptions for bankruptcies occurring in that state. Florida is one such “opt out” state, meaning that Florida law applies to certain aspects of bankruptcies that are heard in the state.
Florida Bankruptcy Means Test
After 2005, Congress passed an amendment to the bankruptcy code to address suspected abuse of the bankruptcy laws by persons who could actually afford to pay back their debts.
Specifically, individuals filing for Chapter 7 bankruptcy – which results in the discharge of most debts, rather than the adoption of a plan to pay back debts as in a Chapter 13 bankruptcy – are required to establish their eligibility for Chapter 7 bankruptcy under what is known as a means test.
A means test determines one of two possible outcomes:
- Any household below the median income (meaning all income coming into the person’s household, not just the income of the person filing for bankruptcy) automatically qualifies for Chapter 7 bankruptcy in Florida.
- If a person’s monthly household income is above the median income in Florida, they will be required to prove that, after paying regularly monthly expenses, their household will have little or no disposable income left at the end of the month.
Florida Bankruptcy Residency Requirement
If you wish to use Florida’s bankruptcy exemptions during your bankruptcy proceedings, you must meet the residency requirement. You can meet the residency requirement in one of two ways:
- You must have lived in Florida for at least 730 days prior to filing your bankruptcy petition.
- If you have lived in multiple states during the 730 days prior to filing your bankruptcy petition, you must have lived in Florida for a majority of the 180-day period preceding the 730-day prior to filing your bankruptcy petition.
If you cannot prove your eligibility under the Florida bankruptcy residency requirement, you will be required to use either the exemptions of another state you have lived in or the standard federal bankruptcy exemptions.
Bankruptcy Exemptions in Florida
Generally speaking, when an individual files for bankruptcy, all of their property (including rights to property) becomes part of the bankruptcy estate. There are, however, various exemptions that exclude certain kinds of property from a debtor’s bankruptcy estate. These are set forth under both federal bankruptcy law and Florida law.
Some of the most important bankruptcy exemptions include:
- Homestead Exemption – The Florida Constitution sets forth an exemption for a person’s homestead, or primary residence, subject to certain limitations such as land area.
- Personal Property Exemption – The Florida Constitution provides an exemption for up to $1,000 of personal property, or up to $2,000 when jointly filing for bankruptcy with a spouse. Florida statutory law also provides limited exemption for personal wages and an exemption for up to $1,000 in the value of a vehicle, or the equity in a vehicle, if subject to a lien or loan.
- Pension Exemption – Florida statutory law provides exemptions for various pension and employment benefits, including certain exemptions for life insurance, annuities, workers’ compensation benefits, and unemployment benefits. Most retirement benefits, such as IRAs, 401(k) plans, and Social Security retirement benefits are exempt under Florida law.
- Wildcard Exemption – A debtor may receive an additional $4,000 exemption for personal property if he or she is ineligible for a homestead exemption. This exemption can also be doubled if filing for bankruptcy jointly with a spouse.
Our Florida bankruptcy lawyers can help you understand the exemptions under Florida law, as well as how they specifically apply to your property.
Florida Rules on Federal Exemptions
If you are eligible to use bankruptcy exemptions under Florida law, you must use those exemptions while filing for bankruptcy in Florida, but you may not use those same exemptions under federal bankruptcy law.
There are certain federal bankruptcy exemptions, however, that are used in addition to Florida bankruptcy exemptions, such as:
- Retirement benefits for employees in the federal civil service, the Foreign Service, the CIA, military service, and in railroads, along with veterans’ benefits and Medal of Honor pensions
- Survivors’ benefits for military personnel, judges, U.S. court directors, judicial center directors, and the administrative assistants for the Chief Justice of the United States
- Death and disability benefits for government employees, longshoremen, and harbor workers
- War, hazard, or injury compensation
- Military deposits to savings accounts while on active duty outside the U.S.
- Certain Native American tribe benefits
- Certain Native American lands or homestead sales or lease proceeds
- Military group life insurance
- Railroad workers’ unemployment benefits
- Seamen’s wages
Bankruptcy exemptions can be highly complicated and fact-specific. Let the knowledgeable Florida bankruptcy attorneys at our total debt solution firm help you understand what property may be eligible for exemption from your bankruptcy estate.
Talk to a Florida Bankruptcy Lawyer Now
Bankruptcy is a complex, time-consuming process. Filing for bankruptcy in Florida is especially complicated, since certain Florida state laws also apply in conjunction with federal bankruptcy law.
Although a debtor is not required to have an attorney in order to file a bankruptcy petition, having an attorney represent you during your bankruptcy proceeding can ensure that your rights and property are protected to the maximum extent permitted by law.
Contact our dedicated, knowledgeable Florida bankruptcy lawyers at Loan Lawyers today to schedule a free consultation to learn more about your legal rights and options when filing for bankruptcy in Florida.