Florida Bankruptcy Laws

How to File Bankruptcy in Florida

Many people are facing difficult financial times in this rough economy. The residents of the state of Florida are no different. When real estate was booming and loans were easy to come by, the people who live here bought as much as they could.

Now, many are stuck in a situation where they are unable to pay their bills due to loss of a job or are not able to see their homes because the value has decreased so significantly. When hard times come, many people have to turn to bankruptcy in order to survive financially. The good news for Florida residents is that it is one of the most liberal states when it comes to bankruptcy laws.

Types of Bankruptcy

There different types of personal bankruptcy, Chapter 7 and Chapter 13. There is also Chapter 11 and that is specifically for business owners. Chapter 7 bankruptcy allows for all debt to be forgiven, as long as it is unsecured debt such as credit cards and other personal debt.

Chapter 13 allows the debtor to repay some of your unsecured debt and also pay on your secured debt. This is what is commonly used when a person wants to keep their home but has fallen behind on their payments. Chapter 13 will let you keep your home and avoid foreclosure while you attempt to make up payments.

Debts Released

With Chapter 7, all of your unsecured debt is released. This includes credit cards, medical bills and other personal debts. Chapter 7 is the most common form of bankruptcy that is filed. All of the assets of the debtor are taken by the court, except their home.

In Florida, homes are exempt from being taken in a bankruptcy. You may also keep all your retirement income assets, cars and some other assets. You may also be able to keep one or two credit cards. You just have to go into an understanding with your credit card company that you realize you have to continue making payments.

With Chapter 13 allows you to save your home from being foreclosed on and allows most of your unsecured debt to be forgiven. Your secured debt will not be forgiven.

Process Length

The process for filing bankruptcy can be lengthy and take between four to six months from start to finish. Paperwork must be filed with the courts and a hearing takes place before anything can be approved.

Effect on Credit

The bankruptcy will stay on your credit report for ten years, but you may be able to establish credit in two years from the time of your bankruptcy. Unfortunately, you credit will be damaged for a few years directly proceeding your bankruptcy.

While you may be able to keep a credit card, it will be very difficult to open a new one or get a new loan for a car or home. You will have to remain diligent and make payments on time during your bankruptcy to ensure your credit improves over time.

What Can Prevent You from Filing

You may not be able to file for Chapter 13 bankruptcy if the courts do not find your plan to be workable. If you do not make enough money for the plan to work, they may deny your request and make you file for Chapter 7. Filing bankruptcy is a right under the Constitution so there is nothing truly preventing you from filing.

Florida Foreclosure Timeline

  • Foreclosure procedures in Florida are all Judicial Foreclosures controlled by the courts. The lender must sue the borrower and obtain an order to foreclose.
  • Depending on the court schedule and load, it normally takes from 180 to 200 days to complete the foreclosure process in Florida. If contested by the borrower or if the borrower files for bankruptcy, this process may be delayed further.
  • The Florida foreclosure process begins with a “Notice of Default” when the lender notifies you that you are in default of your mortgage. This is notice that you have fallen behind enough that the lender is beginning foreclosure proceedings. This typically happens after the borrower is more than 3 payments behind.
  • The lender will then file a Lis Pendens, or “suit pending”. This is a lawsuit against you for defaulting on your mortgage, demanding that you pay your mortgage in full. The Clerk of Court will record the Lis Pendens and you will be served.
  • You will then have 20 days to file an answer with the court in regards to the foreclosure. By filing an answer, you will get an opportunity to present your side at a hearing overseen by a judge. Answering the complaint may also delay the time period for the foreclosure, but that is not guaranteed.
  • At the end of the answer period the lender’s attorney will file a motion with the court to declare summary judgment. There is an additional 20 day answer period before the hearing can be held.
  • If you are unable to successfully contest the foreclosure, or work out a loan modification or short sale, the judge will set a foreclosure sale date which is typically within 30 to 45 days following your hearing. This is when the property will be sold at auction to the highest bidder. This sale may be postponed at the request of the lender or the lender’s attorney.
  • After the sale, there is a 10 day waiting period (or longer if specified in the judgment) before the Clerk issues a Certificate of Title to the new owner. Before this certificate is is filed the mortgagor or the holder of any junior lien may cure the mortgagor’s indebtedness and prevent the foreclosure sale. This is known as the Right of Redemption.
  • If necessary, the Sheriff may evict the previous owner and remove their possessions.
  • The lender may sue the borrower for a deficiency judgment if the sale price does not cover the balance due on the loan plus costs.
  • For more information on Florida Foreclosure laws see Chapter 702 (Foreclosure and Mortgages) and Chapter 45 (Civil Procedure) of the Florida Statutes.

Where Should I Go to File My Bankruptcy?

A bankruptcy is a cause of action that falls under federal law and is therefore filed in federal court.  Most states are divided into several federal District Court regions that are further divided into more localized Divisions.  To begin a bankruptcy, you must file your petition with the District Court in which you have resided, used as a primary location for business, or where principal assets relating to the bankruptcy been located for 180 days.  See 28 USC 1408  In most cases dealing with individual consumer debts, the venue for filing will be in the district where the petitioner lives.  If you have not met the 180 day requirement, ie have not lived in Florida for at least 180 days, then the venue for filing will be in the district where you have lived for the greater part of those 180 days.  In other words, if you have lived in Florida for at least 91 days, then your venue for filing will be in one of the three district courts in that state.

Most of the time venue is not an issue.  However, complications can arise in situations where an individual is filing bankruptcy involving business debts, but they have lived and held property for over 91 days in two different federal districts.  In this case, it may be possible to have two valid venues to choose from.  Most of the time if a venue is incorrectly chosen, then the case will merely be transferred to the correct district court rather than be dismissed.

But it should also be noted that venue for filing purposes has nothing to do with venue for the choice of property exemptions.  For example, if you move to Florida and reside within the state for 91 days, then you may file your bankruptcy paperwork in Florida.  However, this does not mean you automatically get to use Florida’s property exemptions, including the unlimited homestead provision.  This is because the applicable laws regarding the venue for filing bankruptcy paperwork are not the same as that used to decide which state exemptions are applicable.  This is a subject for another blog, but it is worth keeping in mind that the bankruptcy rules can require a person to file bankruptcy in one state, but apply the exemptions from an entirely different state altogether.  For instance, an individual who lived in Georgia all of their life before moving to Florida, could be required to file bankruptcy in Florida but use Georgia’s property exemptions. The point is that choosing the proper venue is not always a straightforward matter, and overlooking the specific requirements in the law can have negative consequences on a bankruptcy case.

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