Florida Bankruptcy Law Blog

Article on Homestead Law

The Florida Bar Journal has an interesting summary of homestead issues raised by the new bankruptcy law. Link: The Florida Bar HOME PAGE FLABAR ONLINE. The article reminds us that the new bankruptcy law has no effect on collection proceedings in state courts outside of the bankruptcy arena.

Protection Time

Forbes online has an article about the effect of the new bankruptcy law on consumers. Link: Protection Time - Forbes.com.

Residential Evictions and Bankruptcy

One of the principal changes in the new bankruptcy law effects people who rent apartments. Under the old law renters on the verge of eviction could file bankruptcy to stop the eviction. The automatic stay imposed by bankruptcy filing would stop the landlord or sheriff from physically evicting tenants even after the landlord obtained a judgment of possession. Sometimes bankruptcy attorneys would serve suggestions of bankruptcy on the sheriffs department hours or minutes before the deputy would set out to evict a tenant.

The new bankruptcy law made changes in favor of residential landlords. Now, a bankruptcy stay does not stop landlords who have obtained a judgment for possession in state court. Debtors can no longer file bankruptcy after the court has ordered them to vacate their apartment and the sheriff has scheduled an eviction. This change in the law was in response to strong objections from the lobby of residential landlords who found that the cost of hiring a creditor bankruptcy attorney to get relief from the stay was higher compared to the money that they are making on any particular unit. Last minute tenant bankruptcy was particularly hard on families who own a few residential properties for investment. Family owned landlords represent themselves in state court, don't know their way around bankruptcy court, and don't want to pay the $150 filing fee for a motion for relief from stay.

If you rent your residence and face financial difficulty bankruptcy will provide temporary protection from eviction only if you file before the landlord gets a judgment for possession in state court.

posted by Jonathan Alper, asset protection and bankruptcy lawyer, Orlando, Florida

Confusion About Debtor Education

A few people who called me last week seeking information about filing bankruptcy were confused about the debtor education requirements under the new bankruptcy law. There are two separate debtor education requirements under the new law. First, you must take a consumer education class prior to filing bankruptcy. The course provider will issue you a certificate of completion, and certification must be filing with your initial petition. Then, there is a second debtor education requirement. During your bankruptcy case you must also take a course in financial management. Filing a certificate of completing the financial management course is a prerequisite to a bankruptcy discharge of all your debts.

Attorneys fees typically do not include your costs of debtor education. The education classes are a separate costs you must pay to file bankruptcy. The good news is that the costs of debtor education will be regulated by the United States Trustee office, and the cost of each class should be under $100. Also, the new law makes it very convenient to comply with education requirements. Approved courses will be provided on the internet and even by telephone for people without internet access. Your bankruptcy attorney will provide you specific information about costs and availability of qualifying debtor education classes in your area.

posted by Jonathan Alper, asset protection and bankruptcy lawyer, Orlando, Florida

The Means Test Does Not Affect Everybody

The part of the new bankruptcy law which has received most attention is the "means test." The means test is a mathematical formula that determines your qualification to file a Chapter 7 bankruptcy based on your income and expenses and other applicable special circumstances. Individuals that do not pass the means test because they are deemed able to repay part of their debts must file a Chapter 13 bankruptcy in lieu of a Chapter 7 liquidation.

Most people do not understand that the means test applies only to those individuals whose debts are primarily consumer or household debts. Individuals whose debts are primarily business or investment related can file Chapter 7 without regard to means test qualification. Many individuals who seek Chapter 7 protection have incurred debts in connection with a failed family business or extensive losses in the stock market. These people are exempt from the means test. Professionals who seek bankruptcy protection primarily from malpractice judgments also are exempt from the means test.

If you are facing financial problems because of a business or investment reversal the new bankruptcy law has relatively little effect on your ability to file Chapter 7 bankruptcy.

posted by Jonathan Alper, asset protection and estate planning attorney, Orlando, Florida

Taxes in Bankruptcy

A common area of confusion among bankruptcy debtors is over dischargeability of income tax liability. The rules about income taxes in bankruptcy are complex. The new bankruptcy law made significant changes in tax dischargeability making it more difficult to eliminate tax debt in Chapter 13 bankruptcy. The first question in tax analysis is whether or not the IRS has filed a tax lien to enforce collection of past due taxes. Generally speaking, income taxes are unsecured debts in bankruptcy. Taxes themselves are priority unsecured debts and get paid in full prior to any money going to general unsecured creditors. Tax debt related to interest and penalties are not priority, and this part of a total IRS claim is treated the same as any other unsecured debt like credit card debt. Some priority and unsecured tax debts is dischargeable in either Chapter 7 or Chapter 13 bankruptcy.

Even through the IRS cannot foreclose a tax lien on homestead, the secured tax lien must be paid in full whenever the debtor sells or refinances.  Both Chapter 7 bankruptcy and Chapter 13 bankruptcy can eliminate some portion of priority and unsecured  tax debt, the general rule (with exceptions)  is  taxes covered by tax liens cannot be discharged in bankruptcy.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

Chapter 7 Bankruptcy and Business Debts

The new bankruptcy law imposes a "means test" to determine if certain debtors are eligible to file Chapter 7 bankruptcy. Only debtors who, according to the means test formula, lack the ability to repay substantial portion of their debts may file Chapter 7.

Most people do not yet understand that the means test applies only to consumers. Consumers for bankruptcy purposes are people whose debts are primarily consumer related. People who incur most of their debts from business are not subject to the means test, and they may file for Chapter 7 without application of the means test formula. People who find themselves insolvent because they borrowed money on credit cards to support a business or an investment, or people who seek bankruptcy protection from personal liability on business related debt can file Chapter 7 under the new bankruptcy law regardless of means test standards.

Georgia Judge Excludes Attorneys From "Debt Relief Agencies"

Under the new bankruptcy law all people who provide bankruptcy assistance to prospective bankruptcy filers are disclose that they are "debt relief agencies." Under the strict language of the new law all bankruptcy attorneys are required to disclose that they and their law firms are "debt relief agencies" to their prospective clients and in their public advertising including yellow page ads. In a decision issued October 17, 2005, the effective date of the new bankruptcy law, a Georgia bankruptcy judge, Judge Lamar W. Davis, Jr. issued a rulling that, "attorneys regularly admitted to the Bar of this Court... are not covered by the provisions of the Code regulating debt relief agencies and are excues from compliance ...." with disclosure provisions. This is a common sense ruling which hopefully will be followed by Florida bankruptcy judges.