Bankruptcy Law

The new bankruptcy law (effective October 17, 2005) makes filing bankruptcy more complicated. The new laws include impediments to filing bankruptcy, new bankruptcy court rules, new forms, and additional work for debtors and their attorneys.  Additionally, there are many parts of the new law which are ambiguous and subject to multiple interpretations.  Because of this, there is some risk and uncertainty about how the new law may impact your assets.

As judges interpret and clarify this law through their court decisions, the new bankruptcy law will become more clear.  Since bankruptcy courts are located all over the country, even after one judge interprets a part of the new law, it will take time for the judge’s interpretation to be tested on appeal and for the ultimate ruling to spread throughout the country’s legal community.

Who Can File Bankruptcy in Florida

A permanent resident of Florida can file bankruptcy in a Florida bankruptcy court. Florida has three bankruptcy districts (Southern District, Middle District, and Northern District), and each of Florida’s counties is assigned to one of the three bankruptcy districts. You must file bankruptcy in the district of your residence. I represent bankruptcy debtors only in the Middle District of Florida which includes many counties along the I-4 corridor (Daytona Beach to Tampa) and I-95 from Brevard County to Jacksonville.

An important concept in Chapter 7 and Chapter 13 bankruptcy is “exemptions” or “exempt property.” When you file a Chapter 7 bankruptcy, the Trustee takes all of your “non-exempt” property and sells it for the benefit of your unsecured creditors. The Trustee cannot take your exempt property and you may keep all of your exempt property regardless of its value and amount. What property is “exempt” and what property is “non-exempt” depends on the laws of the applicable state. Each state has its unique laws about what assets are exempt and non-exempt for bankruptcy purposes. Therefore, before you file bankruptcy you and your bankruptcy attorney must ascertain which state laws will determine your exempt assets.

Florida has liberal bankruptcy exemptions, including an unlimited homestead exemption. Only Florida residents (who meet residency requirements) are eligible for Florida exemptions. Just because you are a Florida resident when you file for bankruptcy does not mean you are entitled to Florida exemptions in bankruptcy.

Under the new bankruptcy law the state exemption law applicable to your bankruptcy is determined by the state in which you have been domiciled for the 730 days (two years) immediately preceding your filing date. If you have not been a permanent resident of Florida for the two-year period immediately preceding your bankruptcy, then your bankruptcy exemptions will be those allowed by the state in which you were domiciled for 180 days immediately preceding the two-year period, or the state in which you were domiciled for the longer portion of such 180-day period.

Otherwise stated, a person filing bankruptcy in Florida today is eligible for the property exemptions he could have claimed if he had filed bankruptcy two years ago. If this person was a Florida resident two years ago, he claims Florida exemptions today; if two years ago he was a resident of a different state then he is entitled to the exemptions of the state of his prior residence.

In reality, the laws about bankrutpcy exemptions are even more complicated than the example above.  Many issues are unclear under the new law and will have to be resolved over time through court decisions.  Before you file bankruptcy in Florida, you and your attorney should discuss where you have resided during the past few years and should discuss whether Florida bankruptcy exemptions would apply in your case.