Bankruptcy in Florida

Bankruptcy isn’t the end—find out how it can be the first step toward financial freedom in FL.

Are you overwhelmed by debt and worried about the future? In Florida, bankruptcy can offer a path to relief, helping individuals and businesses facing severe financial hardship regain stability. Defined simply, bankruptcy is a legal process that gives people who can’t pay their debts a chance to start over with the court’s help. It protects the person filing and their creditors by organizing fair repayment or, in some cases, a discharge of debts. This relief can stop creditor harassment and help you move toward financial recovery.

In Florida, specific state guidelines affect how bankruptcy cases are handled, so it’s important to understand these unique requirements. Working with an attorney who knows Florida’s laws can make all the difference, guiding you through the process and helping you protect your assets and financial future.

Quick Summary: 

• Florida offers Chapter 7, Chapter 11, and Chapter 13 bankruptcy for individuals and organizations with varying financial situations. Chapter 7, also known as “liquidation bankruptcy,” removes unsecured debt for low-income people. Businesses use Chapter 11 to reorganize debts while continuing operations. Chapter 13 allows steady-income people to settle debt without liquidating assets.
• Chapter 7 bankruptcy, a court-supervised process, helps individuals with significant unsecured debt. Many Florida filers may qualify for a “no-asset” case, protecting their property with exemptions. This process involves a means test, financial documentation, and a trustee overseeing asset liquidation and creditor payments. Chapter 7 cases usually conclude within 3-4 months, providing swift relief from most unsecured debts.
• Chapter 11 provides a structured framework for financially distressed businesses to reorganize their debts under court supervision. A detailed reorganization plan is developed, addressing debt repayment, revised payment schedules, and asset management. A court-appointed trustee and a creditors’ committee ensure transparency and accountability. Chapter 11 is also accessible to high-net-worth individuals, offering debt restructuring without complete asset liquidation.
• Chapter 13 bankruptcy allows individuals with steady income to reorganize debts over 3-5 years without liquidating essential assets. A repayment plan is created, tailored to the debtor’s income and expenses. Chapter 13 offers protections like halting foreclosures and allowing asset retention. After successful completion of the plan, eligible unsecured debts are discharged.
• Florida offers strong asset protection, safeguarding essential items like primary residences, vehicles, household goods, retirement accounts, and life insurance policies. Strict filing requirements, including residency rules and mandatory counseling, are in place. The automatic stay provides immediate relief by halting collection actions upon filing.

What are the Different Bankruptcy Types available in Florida?

In Florida, individuals and businesses facing financial challenges have several bankruptcy options to address specific circumstances. Here’s a closer look at the different bankruptcy chapters available in Florida:

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, known as “liquidation bankruptcy,” is intended for individuals with limited income and few assets. This type of bankruptcy helps those overwhelmed by unsecured debts by liquidating certain assets. The process is straightforward and relieves individuals who need help to maintain a structured repayment plan.

Key Features of Chapter 7 Bankruptcy

Chapter 7 bankruptcy has specific features that make it a valuable option for individuals facing significant financial distress. It relieves debts through a structured, court-supervised process focused on non-exempt asset liquidation and debt discharge.

• Liquidation of Non-Exempt Assets. In Chapter 7, certain assets not covered by exemptions are sold to pay creditors. Exemptions protect basic, essential items, while luxury or secondary properties might be liquidated. In Florida, many debtors qualify for a “no-asset” case, where exemptions cover all assets, so no liquidation occurs.
• Means Test Requirement. To file for Chapter 7, individuals must pass a means test comparing their income to the state’s median income level. If income is below the median, Chapter 7 eligibility is likely; otherwise, Chapter 13 may be required instead. This test ensures only those in significant financial hardship can utilize Chapter 7.
• Court-Appointed Trustee Management: A court-appointed trustee reviews all assets, exemptions, and financial records to identify non-exempt assets for liquidation. The trustee handles the liquidation process and oversees the distribution of funds to creditors. This role ensures transparency, benefiting both debtors and creditors.
• Completion Time. Chapter 7 generally takes 3-4 months from filing to debt discharge. This rapid timeline is helpful for individuals seeking immediate financial relief. Once the trustee completes the review, the discharge process follows shortly.
• Discharge of Most Unsecured Debts. At the end of Chapter 7, unsecured debts like credit card balances and medical bills are usually discharged. Secured debts may not be discharged unless the debtor surrenders the asset associated with the debt. Discharge prevents creditors from pursuing further collection activities, allowing a fresh start.

Florida Exemption Protections

Florida offers some of the strongest asset protection laws, helping debtors keep basic necessities. Key exemptions include:

• Primary Residence Equity. The Homestead Exemption protects the equity in a primary residence up to specific size limits.
• Vehicle Equity Allowance. Up to $1,000 in vehicle equity can be protected, enabling debtors to keep a modest car.
• Essential Household Goods. Items like furniture, appliances, and clothing are generally exempt, as they support basic living standards.
• Qualified Life Insurance Policies: Certain life insurance policies are exempt, protecting financial support for dependents.
• Retirement Accounts and Workers’ Compensation Benefits. Retirement accounts and workers’ compensation benefits are fully protected from liquidation, ensuring long-term financial security for debtors.

Filing Requirements

To file for Chapter 7, debtors must provide detailed and accurate documentation of their financial situation. These requirements include:

• Detailed Financial Documentation. Debtors must submit recent pay stubs, tax returns, and bank statements to show income and financial history.
• Asset and Liability Listings. An inventory of all assets and liabilities is essential to determine which items may be liquidated.
• Income and Expense Statements. A detailed breakdown of monthly income and expenses helps the trustee evaluate eligibility.
• Unexpired Lease/Contract Disclosure. Any ongoing lease agreements or contracts must be reported; sometimes, these can be terminated or maintained.
• Credit Counseling Completion. Debtors must complete a credit counseling course that teaches debt management and financial planning within 180 days before filing.

Benefits of Chapter 7

Chapter 7 provides a quick and effective path to debt relief with lasting benefits. Common benefits are:

• Automatic Stay Protection. Filing initiates an automatic stay, immediately stopping collection actions, wage garnishments, and foreclosures.
• Creditor Collection Halt. This pause gives debtors time to navigate the bankruptcy process without constant creditor pressure.
• Possibility of a “No-Asset” Case. Many Florida cases are “no-asset” cases where exemptions protect all assets, so no property is liquidated.
• Fresh Financial Start. Chapter 7 discharges most unsecured debts, enabling debtors to restart their finances without overwhelming debt.

Chapter 11 Bankruptcy

Chapter 11 bankruptcy allows businesses to reorganize their debt and continue operating. Unlike Chapter 7, which focuses on liquidation, Chapter 11 aims to help businesses regain financial health while maintaining asset control. The business, known as the “debtor in possession,” continues operating under court supervision.

Key Features of Chapter 11 Bankruptcy

Chapter 11 offers unique options for debtors aiming to restructure and protect creditors’ interests. Key features allow businesses to continue operations while managing and reorganizing their financial obligations.

• Business Continuation During Reorganization. Businesses can keep running while reorganizing debts, helping them avoid a complete shutdown. This feature is handy for companies looking to regain profitability. It allows the debtor to retain control over operations with court oversight.
• Debtor in Possession. The business owner or individual controls assets and operations, following court guidelines. Major financial decisions must align with court regulations to ensure creditor protection. This role allows the debtor to keep essential operations going while restructuring.
• Creditors’ Committee. Usually composed of the largest unsecured creditors, this committee reviews the reorganization plan to protect creditors’ interests. It represents an additional accountability layer, ensuring fair decisions. Creditors can voice concerns and review plans for fair representation.
• Disclosure and Reorganization Plan. The debtor must submit a disclosure statement explaining their finances and a reorganization plan for managing debts. This plan outlines changes and must be clear enough for creditors to understand its implications. Court approval is required to ensure that the plan is realistic.

Requirements of the Reorganization Plan

The Chapter 11 reorganization plan is essential for guiding the debtor’s path to financial recovery while ensuring creditor protection. Below are the requirements for the reorganization plan in Chapter 11:

• Outline a Debt Restructuring Strategy. The restructuring plan specifies how debts will be managed, potentially with reduced payments or extended terms.
• Revise Payment Schedules. The plan offers creditors a revised schedule that aligns with the debtor’s financial recovery.
• Detail Asset Management or Liquidation Proposals. If assets must be sold, the plan details the process, including any retained assets needed for business.
• Regular Court Reporting. Chapter 11 debtors must regularly report their financial status and plan progress to the court.
• Obtain Court Approval for Major Decisions. The court must approve large business moves, like asset sales or new loans, to protect debtor and creditor interests.

Individual Chapter 11

Chapter 11 is also available to high-net-worth individuals whose debts exceed Chapter 13 limits. It offers a structured way to manage debts without total liquidation. This option allows asset retention while providing a flexible repayment structure.

Chapter 13 Bankruptcy

Chapter 13, or “Reorganization Bankruptcy,” helps individuals with steady income manage unmanageable debts. Unlike Chapter 7, Chapter 13 allows debtors to repay debts over 3-5 years without liquidating assets. It is ideal for individuals who want to keep homes and cars.

Key Features of Chapter 13 Bankruptcy

Chapter 13 has several key features that make it a valuable option for individuals with steady income seeking debt relief. It enables debtors to retain essential assets and offers a structured repayment plan that spreads obligations over time.

• 3-5 Year Repayment Plan. Debtors make payments over 3-5 years, spreading out financial obligations. A five-year plan is typical for higher-income individuals, while lower-income individuals may qualify for a three-year plan.
• Regular Income Requirement. Debtors must have a steady income to meet regular payments; this income can come from wages, pensions, or government benefits.
• Asset Retention Possibility. Chapter 13 lets debtors keep important assets like homes and vehicles, halting foreclosure and repossession actions during the repayment period.
• No Means Test Requirement. Unlike Chapter 7, Chapter 13 has no income threshold for eligibility, making it available to a broader range of people.
• Discharge Upon Plan Completion. At the plan’s end, eligible debts are discharged, freeing the debtor from further payment obligations.

Eligibility Requirements for Chapter 13

Eligibility for Chapter 13 bankruptcy depends on several factors, including income stability, debt limits, and the ability to maintain a payment plan. These requirements ensure that only individuals with the resources to complete a structured repayment plan can qualify.

• Debt Limits Compliance. Chapter 13 limits secured and unsecured debts, which are periodically adjusted. For 2023, these limits were set at approximately $1,395,875 for secured debts (such as mortgages or car loans) and $465,275 for unsecured debts (like credit card bills or personal loans).
• Sufficient Regular Income. Debtors must show reliable income, including wages or pension income, to cover the required monthly payments.
• Ability to Meet Payment Obligations. Debtors must demonstrate an ability to meet plan terms with a budget that accounts for basic living expenses.
• Proposed Repayment Plan Submission. The debtor submits a plan that allocates funds to creditors over the specified term.
• Income Calculation Verification: Pay stubs, tax returns, or other documentation must verify income to ensure payment feasibility.

Benefits of Chapter 13

Chapter 13 offers valuable benefits, allowing debtors to reorganize debt and maintain control over essential assets. These features provide immediate relief from aggressive collection actions and offer a long-term solution for debt repayment.

• Automatic Stay Protection. Filing stops most collection actions, giving debtors time to focus on repayment.
• Halts Additional Fees and Interest. Certain debts stop accumulating fees and interest during the plan.
• Prevents Secured Debt Penalties. Debtors can avoid penalties associated with missed payments on secured debts like mortgages.
• Structured Debt Management. Chapter 13 consolidates debts into a single plan, simplifying repayment.
• Asset Protection Options. No asset liquidation is required, so debtors can maintain ownership of essential property.

Plan Implementation Process

The Chapter 13 plan requires careful oversight by the court and trustee:

• Court-Appointed Trustee Supervision. The trustee oversees the case, ensures payment distribution, and monitors adherence to the plan.
• Creditor Participation Through 341 Meeting. Creditors meet to review the repayment plan, ask questions, and raise concerns.
• Regular Payment Distributions. The trustee distributes debtor payments to various creditors as outlined in the plan.
• Progress Monitoring. The trustee monitors payment consistency and may adjust the plan if needed.
• Plan Modification if Necessary. If the debtor’s circumstances change, the court may allow modifications to keep the plan feasible.

Florida Bankruptcy Requirements

Bankruptcy in Florida is subject to specific requirements that ensure individuals meet eligibility criteria and understand the asset protections available in the state. By meeting these requirements, individuals can apply for bankruptcy with clear insight into their residency obligations, income qualifications, and property exemptions under Florida law.

Residency Requirements

To file for bankruptcy in Florida and use its exemptions, a person must have lived in the state for at least 730 days (or two years) immediately before filing. If this two-year residency requirement isn’t met, applicants may still qualify if they resided in Florida for most of the 180 days before those 730 days. 

This requirement ensures that individuals intending to file under Florida’s specific protections are genuinely state residents. For those who have recently relocated, it’s essential to consider that they may need to file in their previous state if they haven’t met these criteria, as each state has its own unique bankruptcy protections and exemptions.

Means Test Qualification

The means test is essential to the bankruptcy process, determining whether an individual qualifies for Chapter 7 bankruptcy in Florida. Applicants with a household income below Florida’s median automatically pass the means test, making them eligible for Chapter 7 without further analysis. 

For those with income above the median, their financial situation is scrutinized further. Monthly expenses are carefully evaluated to calculate disposable income. Suppose disposable income is deemed sufficient to repay a portion of their debts. In that case, the applicant may be directed to file for Chapter 13 bankruptcy instead, where debts are reorganized into a payment plan. This means test helps ensure that Chapter 7 bankruptcy remains accessible to those truly unable to pay their debts.

Florida’s Bankruptcy Protections

Florida offers robust protections to safeguard various assets from creditors during bankruptcy. These protections, especially the homestead exemption, help individuals retain essential assets while navigating their financial recovery. Understanding these exemptions can provide Florida residents seeking bankruptcy relief peace of mind.

Homestead Exemption

Florida’s homestead exemption is among the most generous in the United States. It allows individuals to protect their primary residence’s value, regardless of its worth. However, the size of the property is limited based on its location. 

Only up to half an acre of land can be exempt for properties within a municipality, while properties outside a municipality, in unincorporated areas, can exempt up to 160 acres. This exemption is an essential asset protection tool, enabling individuals and families to maintain their homes while resolving their debt obligations through bankruptcy.

Additional State Protections

Beyond the homestead exemption, Florida provides other protections for personal property, retirement accounts, vehicle equity, and wages. These exemptions cover essential aspects of personal assets to help maintain a basic standard of living during financial hardship:

• Personal Property Exemptions: Florida allows an exemption of up to $1,000 in personal property. If the homestead exemption is not utilized, this amount increases to $4,000, providing additional support for those who rent rather than own property.
• Pension Protections: Florida safeguards certain retirement accounts, pensions, and benefits from bankruptcy claims, ensuring these funds remain available for future needs.
• Vehicle Equity Protection: Individuals can exempt up to $1,000 in equity in their vehicle. This exemption protects a person’s ability to retain transportation, often necessary for employment and daily life.
• Wage Exemptions: Florida law allows wage exemptions, particularly for heads of households, up to $750 per week or up to 75% of the wages, whichever is greater. This exemption helps shield essential income from creditors, supporting individuals in maintaining a basic standard of living while repaying debts.

The Bankruptcy Process in Florida

In Florida, the bankruptcy process varies slightly depending on which chapter an individual or business files under, such as Chapter 7, Chapter 11, or Chapter 13. However, each type follows some standard procedures, including filing in federal court, submitting required documentation, and activating the automatic stay. Key steps in the bankruptcy process are:

Submit Petition to Bankruptcy Court

All bankruptcy cases in Florida must be filed in a federal court under one of the three district jurisdictions: Northern, Middle, or Southern District of Florida. This is determined by the debtor’s county of residence or business location. Each bankruptcy case begins by filing a petition and supporting documents that provide a full view of the debtor’s financial situation. Regardless of the chapter, filers are required to submit:

• Official bankruptcy petition
• Schedules of assets and liabilities
• Income and expenditure schedules
• Statement of financial affairs
• Creditor mailing list

Complete Credit Counseling

Debtors must complete a credit counseling course through a government-approved agency within 180 days before filing. This course helps ensure that debtors understand all available options, including alternatives to bankruptcy. If the debtor completes the course, they receive a certificate that must be submitted along with their bankruptcy petition.

Appointment of a Bankruptcy Trustee

Once the case is filed, a bankruptcy trustee is appointed to oversee the process. The trustee reviews all submitted documents, verifies the accuracy of the debtor’s claims, and, in Chapter 7 cases, manages the liquidation of any non-exempt assets. In Chapter 13 cases, the trustee evaluates the proposed repayment plan and ensures that creditors receive payments as outlined.

Attend the 341 Meeting of Creditors

Typically scheduled 20 to 40 days after filing, the Meeting of Creditors, also known as the 341 meeting, is where the trustee and any interested creditors can question the debtor under oath about their finances and bankruptcy petition. Although creditors rarely attend, debtors must prepare thoroughly, as this meeting allows the trustee to confirm the accuracy of the documents and verify the debtor’s assets and liabilities.

Complete the Debtor Education Course

After the 341 meeting, the debtor must take a second financial management course, the Debtor Education Course. This course, which must be completed before receiving a discharge, educates the debtor on managing finances post-bankruptcy. Please complete this course to avoid dismissing the case or denying the discharge.

Discharge of Debts

If the court finds that the debtor has met all requirements, it issues a discharge order, legally releasing the debtor from liability for certain types of debt. This discharge marks the end of the bankruptcy case and provides a fresh financial start. However, some debts, such as student loans and certain tax obligations, are not typically dischargeable.

Automatic Stay Upon Filing

Once a bankruptcy petition is filed, an automatic stay is enacted under 11 U.S.C. § 362. This automatic stay halts all collection activities, protecting the filer from creditors. This means:

• All collection actions must stop, including phone calls, letters, lawsuits, wage garnishments, and foreclosures.
• Secured creditors (those with collateral, like a mortgage lender or car loan company) cannot initiate or continue repossession or foreclosure actions.

The automatic stay is an essential aspect of bankruptcy. It grants debtors temporary relief, giving them time to work through the bankruptcy process without the pressure of collection efforts. Creditors who ignore the stay and continue collection attempts may face sanctions from the court.

Other Important Considerations

• Means Test: Passing the means test is essential for those filing under Chapter 7. This test assesses whether the debtor’s income falls below the median income level in Florida, allowing them to qualify for Chapter 7 rather than Chapter 13. Those who fail the means test may need to pursue Chapter 13, which involves a repayment plan.
• Exemptions in Florida: Florida law allows certain property exemptions, which enable debtors to protect specific assets from liquidation. Notable exemptions include the homestead exemption for primary residences, personal property up to a specific value, and qualified retirement accounts. These exemptions vary by case and must be evaluated carefully.
• Legal Assistance: Due to the complexity of bankruptcy laws, it is advisable to work with an experienced bankruptcy attorney. An attorney can ensure accurate documents, advise on strategies for maximizing exemptions, and provide representation during the 341 meeting. This guidance can be invaluable, as errors in bankruptcy filings can lead to delays or denials.

Why Is It Important to Hire an Experienced Attorney in Florida for Bankruptcy?

Filing for bankruptcy can feel overwhelming, especially with the legal and financial decisions involved. Hiring an experienced attorney in Florida can make a significant difference in ensuring a smoother process and protecting your assets.

Choosing the Right Bankruptcy Chapter

An attorney can help you determine whether Chapter 7, Chapter 11, or Chapter 13 is the best fit for your financial situation. Each chapter has specific qualifications and processes; the right choice depends on your income, assets, and goals. With an attorney’s guidance, you’re more likely to select the chapter that best supports your path to financial recovery.

Guidance with Detailed Paperwork

Bankruptcy filings require extensive documentation, from income and asset statements to creditor lists and expense schedules. An attorney can help you prepare these documents accurately, minimizing the risk of errors that could delay or jeopardize your case. By ensuring each detail is correct, they help you avoid potential legal complications.

Protection from Creditors

Filing for bankruptcy activates an automatic stay, which stops creditors from collecting debts immediately. An attorney can handle communications with creditors on your behalf, ensuring they follow legal requirements and do not violate the stay. This can reduce the stress of facing collection calls, lawsuits, or repossession efforts while focusing on your case.

Maximizing Available Exemptions

In Florida, specific bankruptcy exemptions protect essential assets, like your home or retirement accounts, from liquidation. An attorney understands these exemptions in-depth and can help you claim the ones that apply to your case. This maximizes your asset protection, ensuring you retain as much of your property as possible.

Reducing Mistakes and Delays

Bankruptcy involves strict legal deadlines and rules that must be followed closely. An attorney’s experience in these requirements helps you avoid common mistakes that could cause costly delays or dismissals of your case. Handling each step accurately simplifies the process and keeps your case moving forward efficiently.

Filling For Bankruptcy? Call our West Palm Beach Bankruptcy Lawyer Now!

It’s not easy to file for bankruptcy, but finding relief from heavy-burdening debt is absolutely possible. At Rivera Law Firm, P.A., we understand the stress you’ve endured. We will help point you in the right direction to a new beginning with your finances. We work in Chapter 7, Chapter 11, and Chapter 13 cases; our case experience will find an applicable situation to support you. Our West Palm Beach bankruptcy attorney will be available to explain your options and allow you to choose what might best suit your needs.

Reach out today to book a free case evaluation, where we’ll review your options and answer your questions. You don’t have to face this alone—let us help you find a path toward financial peace.