Chapter 7 Overview

Chapter 7 Bankruptcy in Florida

The three best known types of bankruptcy are chapter 7, chapter 11, and chapter 13, Chapter 7 is a liquidation or “straight”; bankruptcy. This basically involves the discharge of certain debt while you keep only your “exempt” property. Chapter 11 is a procedure for business or individuals (usually with complex situations) to reorganize their debts. Chapter 13 is a procedure for individuals with a regular source of income to reorganize their debt. It is similar to chapter 11, except that the procedure is greatly streamlined and the creditors do not get to vote.

Automatic Stay: Upon the filing of a chapter 7 bankruptcy case, a person filing for bankruptcy (a “debtor”) is protected from most collection actions against him and his property. Certain types of actions are not automatically stayed such as criminal cases, certain actions regarding alimony, maintenance, or support, and governmental police or regulatory actions.

Creditor’s Meeting: About 4 after the bankruptcy case is filed, a debtor is required to attend a “creditor’s meeting”; at the Federal Building. This is a short meeting with the bankruptcy trustee and any creditors who choose to attend. In most cases, no creditors bother to attend. The bankruptcy judge will not be in attendance.

Discharge Order: About 3 months after the creditor’s meeting, the “Discharge Order” is usually signed by the bankruptcy judge.

In Florida, the following is the only exempt (or protected) property:

Homestead Exemption – A Florida “homestead” may be kept you a debtor “exempt” from the bankruptcy estate. The maximum dollar value of a “homestead” is unlimited, but the size of the land is limited to 1/2 acre if located within a municipality and 160 acres if located outside of a municipality.

$1,000 Personal Property Exemption – Each bankruptcy debtor may “exempt” $1,000 of personal property from the bankruptcy estate. This includes furniture, clothing and jewelry. The valuation of the personal property is generally based on its liquidation or “garage sale” value.

$4,000 Personal Property Exemption (known as the Florida Wildcard Exemption) – A debtor may claim up to $4,000 of personal property as exempt if the debtor does not use the homestead exemption. (Fl. Stat. 222.25.)

$1,000 Motor Vehicle Exemption – Each bankruptcy debtor may exempt $1,000 is equity in a car, truck or other motor vehicle.

Pension Plans, IRAs’, and other Retirement Plan – In general, most pension plans, IRA’s and other retirement plans are exempt from the bankruptcy estate.

Above we’ve listed the most common exemptions, however, there are many other exemptions that may apply to your situation, such as:

• Exemptions for Insurance Policies and Annuities:
  • The proceeds of a life insurance policy payable to a specific beneficiary are fully exempt. (Fl. Stat. 222.13.)
  • The cash surrender value of a life insurance policy and the proceeds of an annuity contract are fully exempt. However, annuity proceeds resulting from lottery winnings are not exempt. (Fl. Stat. 222.14.)
  • Disability income benefits are exempt. (Fl. Stat. 222.18.)
  • Fraternal benefit society benefits are exempt. (Fl. Stat. 632.619.)
• Personal Injury Exemptions – Damages to employees for injuries or death incurred in hazardous occupations are exempt. (Fl. Stat. 769.05.)
• Exemptions for Public Benefits – Although Florida opted-out of the federal bankruptcy exemption scheme, Section 222.201 allows the federal exemptions listed under Section 522(d)(10) of the Bankruptcy Code. These exemptions include: veterans benefits, social security benefits, reemployment assistance, and local public assistance benefits. (Fl. Stat. 222.201)
  • Workers compensation benefits are exempt. (Fl. Stat. 440.22.)
  • Crime victims’ compensation benefits are exempt, unless the debtor is seeking to discharge debt for treatment of related injury. (Fl. Stat. 960.14.)
  • Alimony and Child Support Exemptions
  • Alimony and child support, to the extent reasonably necessary for the support of the Debtor and any dependent of the Debtor, are exempt. (Fl. Stat. 222.201.)

Above we’ve listed the most commonly used exemptions in Florida. There may be other exemptions that apply to your situation.  During your consultation, we’ll discuss them with you as the apply.