It is a common bankruptcy myth that when a person files for bankruptcy relief they lose all or most of their property. In reality, most debtors keep all their property when they file a Chapter 7 or Chapter 13 bankruptcy case. One of the goals of a bankruptcy case is to help a person who has experienced a financial hardship get a fresh start. Debtors need their car and other property so that they can work and continue on the road to financial well-being to get back on their feet financially.
The Law Offices of Justin McMurray, P.A. assist individuals and couples who need debt relief find an affordable solution to their debt problems. If you are struggling with debts you cannot pay, the information in this blog may be helpful. We also encourage you to contact our Jacksonville bankruptcy attorney for a free consultation by calling 904-248-4482.
Topics discussed in this bankruptcy article include:
- What are Bankruptcy Exemptions?
- What are the Florida Bankruptcy Exemptions?
- Assets and Property Included in a Bankruptcy Case
- Can I Keep My Car in Chapter 7 or Chapter 13?
What are Bankruptcy Exemptions?
As mentioned above, one goal of filing bankruptcy is to recover from a financial crisis. However, an individual needs to retain some property to recover and rebuild. Therefore, Congress included federal bankruptcy exemptions in the Bankruptcy Code that allow debtors to protect a certain amount of equity in various assets from the court and creditors. When a debtor claims a bankruptcy exemption, the exemption protects a specific amount of equity in a piece of property. Exempt equity cannot be used to pay debts.
The Bankruptcy Code permits states to enact state-specific bankruptcy exemptions. Some states have opted to enact laws that require debtors within that state to use the state bankruptcy exemptions. Florida is one of those states.
If you file bankruptcy in Florida, you are required to use Florida bankruptcy exemptions if you have been a Florida resident for at least 730 days before filing your bankruptcy petition. If you have not been a resident of Florida for at least 730 days, you may have the option of choosing to use federal bankruptcy exemptions depending on the state laws of the state in which you resided during the 180 days before the two-year residency requirement to use Florida bankruptcy exemptions.
It is important that you choose the correct bankruptcy exemptions to use in your case. Claiming the incorrect bankruptcy exemptions could result in you losing property that you might have been able to keep had you used the correct exemptions. An experienced Jacksonville bankruptcy attorney can ensure that you utilize the correct bankruptcy exemptions to maximize protection of assets in bankruptcy.
What are the Florida Bankruptcy Exemptions?
Florida lawmakers have enacted favorable bankruptcy exemptions for Florida residents. For example, homeowners who have owned their home for at least 1,215 days may qualify for an unlimited homestead exemption to protect all equity in their home. Other states limit the amount of equity a debtor can protect in their home.
Other Florida bankruptcy exemptions include:
- $1,000 in a motor vehicle
- $1,000 in personal property
- Professionally prescribed health aids
- $4,000 wildcard exemption if the homestead exemption is not used
- Hurricane savings, education savings, and health savings
- Tax refunds and credits
- Most pension and retirement accounts
- Government and public benefits
- Alimony and child support payments
- Most life insurance policies, annuities, and disability income
The above list is not an exhaustive list of all bankruptcy exemptions. A Jacksonville bankruptcy attorney carefully reviews your case to determine if any property may be at risk and discusses your options with you before you file your bankruptcy case. By working with an experienced bankruptcy lawyer in Jacksonville, you may avoid losing property because you are unfamiliar with the various bankruptcy laws related to exemptions and property in bankruptcy.
Assets and Property Included in a Bankruptcy Case
When you file a Chapter 7 or Chapter 13 bankruptcy case, your property becomes assets of the bankruptcy estate. In your bankruptcy schedules, you must report all property that you own at the time of the bankruptcy filing. However, this does not mean that you are going to lose your car or any of your property.
In a Chapter 7 bankruptcy case, the bankruptcy trustee has a duty to review your property to determine if any of the property may be liquidated to pay your unsecured creditors. If a debtor has non-exempt equity in a piece of property, the Chapter 7 trustee sells the property, either through a motion to sell or an auction, and uses the proceeds to pay unsecured debts. However, most Chapter 7 cases filed in Florida are no-asset Chapter 7 cases, meaning that all property is exempt and cannot be liquidated to pay debts. In other words, most debtors keep all their property and get rid of all their unsecured debts.
In a Chapter 13 case, the bankruptcy trustee does not sell property to pay creditors. If a debtor has property that is worth more than the bankruptcy exemption, the debtor can pay a little extra each month to the Chapter 13 trustee to keep the property. Debtors with high-value assets can often file a Chapter 13 bankruptcy case to protect those assets from being seized by creditors or the court to pay debts.
Can I Keep My Car in Chapter 7 or Chapter 13?
In many cases, a debtor can keep his or her vehicle in a bankruptcy case because the equity in the vehicle is below the maximum exemption amount. However, the debtor would need to continue paying the car payments if there is a lien on the vehicle. If the equity exceeds the exemption, the debtor may “buy back” the vehicle in a Chapter 7 case or retain the vehicle by filing a Chapter 13 case. Your Jacksonville bankruptcy attorney will work with you to find a solution for your debt problem that allows you to maintain a vehicle for you and your family's needs.
Call a Jacksonville Bankruptcy Attorney for a Free Case Review
Contact The Law Offices of Justin McMurray, P.A. by calling 904-248-4482 or using the contact form above to request a free consultation with our Jacksonville bankruptcy lawyer.