Florida Bankruptcy Law Blog

Floridian Moves to New York: What Exemptions Apply?

Florida resident moves to New York and files bankruptcy within two years after leaving Florida. What state’s laws apply to his bankruptcy.

The debtor cannot apply New York law because he has not been a resident of New York for two years prior to filing. The new bankruptcy law states you must reside in the state of filing for two years to uses that state’s exemption laws. The statute is designed to stop debtor’s for shopping for preferred forums in which to file bankruptcy.

I don’t think the debtor could use Florida laws even though he had always resided in Florida before moving to New York. Florida Statute 222.20 states that residents of Florida shall use Florida exemptions rather than federal exemptions. Bankruptcy courts have held that only Florida debtors can use Florida exemptions. In re Sanders, 72 BR 124. I think that this debtor would use federal exemptions because he would be ineligible to claim the exemptions from either Florida or New York. Other than Florida’s homestead protection, federal exemptions are generally more liberal under the new bankruptcy law than Florida exemptions.

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

Protection of Foreclosure Proceeds

I discussed the following case with a creditor attorney. A debtor loses his house at a foreclosure sale. The foreclosure sale price brings in enough money to pay off the mortgage and provide excess funds of $20,000. The funds are held temporarily in the trust account of the debtor’s attorney. Next, the debtor files bankruptcy. The question is whether the excess funds from the sale are exempt.

Florida law protects the proceeds from the sale of a homestead so long as the debtor intends to reinvest the proceeds in a new homestead. No case has distinguished proceeds from a voluntary sale from foreclosure sale proceeds. Therefore, the foreclosure proceeds should be exempt if intended for a new homestead.

Business or Personal Bankruptcy

I received today a frequently asked question from the owner of a small business which was having financial problems where the owner was personally liable for many of the business debts. In this common situation, the owner usually wants to know if the bankruptcy solution involves a personal bankruptcy, a business bankruptcy, or both. In most cases, I advise people to start with a personal bankruptcy, and in most cases a business bankruptcy is unnecessary. Regardless of what happens to the business the owner cannot get a new start unless he discharges his personal liabilities in bankruptcy.

The business bankruptcy does not discharge any debts. Only individuals receive a bankruptcy discharge. A business bankruptcy functions more like a receivership. The bankruptcy trustee assembles business assets, liquidates the assets, and distributes available proceeds to business creditors. A business filing bankruptcy is still legally liability to its creditors after going through bankruptcy. Business bankruptcies are useful for small business that want to avoid defending multiple lawsuits and collection effort from business creditors by turning over asset liquidation to the bankruptcy trustee.

The owner of a failed business can move on in life without bankruptcy if the owner is not personally liable on business debts. However, the owner will not find relief from any of the business debts if he is personally liable until filing personal bankruptcy. For these reasons, I usually try to help the small business owners with a single personal bankruptcy if possible.

posted by Jonathan Alper, bankruptcy attorney, Orlando, Florida