Bankruptcy laws can be complex and difficult to navigate, especially for those who are contemplating filing for bankruptcy in the state of Florida. With that in mind, here are the top questions about Florida’s bankruptcy laws answered to help individuals better understand the process and how it may affect them.
1. What is bankruptcy?
Bankruptcy is a legal process that allows individuals or businesses to declare themselves unable to pay their debts. This process helps individuals and businesses to either restructure their debts or have them eliminated entirely.
2. What are the different types of bankruptcy?
In Florida, there are two types of bankruptcy that individuals and businesses can file for – Chapter 7 and Chapter 13. Chapter 7 bankruptcy is also known as liquidation bankruptcy, where non-exempt assets are sold to pay off creditors. Chapter 13 bankruptcy, on the other hand, allows individuals to create a repayment plan to pay off their debts over a period of three to five years.
3. What is the eligibility criteria for filing for bankruptcy in Florida?
To file for bankruptcy in Florida, individuals must meet certain eligibility criteria. For Chapter 7 bankruptcy, individuals must pass a means test, which compares their income to the state’s median income. If their income is below the median, they may be eligible for Chapter 7 bankruptcy. If their income is above the median, they may still be able to file for Chapter 7 but will need to pass additional tests to determine their eligibility. For Chapter 13 bankruptcy, there is no means test, but individuals must have a regular income and their debts must fall within the allowed limits.
4. What is the role of a bankruptcy trustee?
A bankruptcy trustee is a court-appointed individual who oversees the bankruptcy process. They are responsible for reviewing the debtor’s financial information, collecting and selling non-exempt assets, and distributing the proceeds to creditors. In Chapter 13 bankruptcy, the trustee also receives and distributes the debtor’s monthly payments to creditors.
5. How does bankruptcy affect an individual’s credit score?
Filing for bankruptcy can significantly impact an individual’s credit score. Chapter 7 bankruptcy stays on an individual’s credit report for ten years, while Chapter 13 bankruptcy stays on their credit report for seven years. This can make it challenging to obtain credit in the future, and any new credit obtained may come with high-interest rates.
6. Will all debts be discharged in bankruptcy?
Not all debts can be discharged in bankruptcy. Some debts, such as student loans, taxes, and child support payments, are not eligible for discharge. However, bankruptcy can still help individuals manage their debt by providing them with a repayment plan or eliminating other debts, allowing them to focus on paying off non-dischargeable debts.
7. Can creditors continue to contact individuals after filing for bankruptcy?
Once an individual files for bankruptcy, an automatic stay is put in place. This means that creditors are not allowed to contact them or take any action to collect the debt. If creditors continue to contact individuals, they should inform them of their bankruptcy filing and provide them with their case number.
8. Can individuals keep their assets in bankruptcy?
In Florida, individuals can keep certain assets in bankruptcy, known as exempt assets. These assets include a primary residence, personal property, retirement accounts, and certain insurance policies. However, non-exempt assets, such as expensive jewelry or a second home, may need to be sold to pay off creditors.
9. Can individuals file for bankruptcy more than once?
Yes, individuals can file for bankruptcy more than once. However, there are time limits that must be met between filings. For Chapter 7 bankruptcy, individuals must wait eight years before filing again, while for Chapter 13 bankruptcy, the waiting period is two years.
10. How long does the bankruptcy process take in Florida?
The duration of the bankruptcy process can vary, depending on the type of bankruptcy filed and the complexity of the case. Generally, Chapter 7 bankruptcy takes approximately three to six months, while Chapter 13 bankruptcy can take three to five years to complete.
11. Can individuals choose which type of bankruptcy to file for?
In most cases, individuals can choose which type of bankruptcy to file for, but there are exceptions. For example, if an individual’s income is too high, they may not be eligible for Chapter 7 bankruptcy and will have to file for Chapter 13. Additionally, some individuals may be required to file for Chapter 13 if they have significant assets or if they have previously filed for bankruptcy.
12. Can bankruptcy stop foreclosure or repossession?
Yes, filing for bankruptcy can stop foreclosure or repossession of assets. The automatic stay that goes into effect upon filing for bankruptcy halts all collection actions, including foreclosures and repossessions. However, it is essential to note that individuals may still need to make payments on secured debts, such as a mortgage or car loan, in order to keep the asset.