Florida Bankruptcy Law Blog

Bankruptcy Attorneys Wanted

I get calls or emails about  bankruptcy from people all over Florida. I practice  in the Orlando Division and  cannot serve clients in many parts of the State. I find that I have to turn away many people looking for legal help. I would rather refer them to someone whom I think can help them.  In particular,  I would like to find a bankruptcy attorney on the west coast to whom I can refer potential clients.  So, if you are a west coast Florida bankruptcy attorney  please contact me by email or phone if you want occasional referrals. 

Secured Creditor Files Unsecured Claim

A creditor believes it has a secured claim. The creditor files a proof of claim form which is blank. The proof of claim does not assert a secured claim, an unsecured claim, or an amount of the debt owed. A bankruptcy judge asked myself and another attorney last week if the filing of a blank proof of claim in any way affects the creditor’s right to be a secured creditor. The judge had no experience with a blank proof of claim.

I do not think the blank proof of claim would diminish or waive an otherwise effective security interest. The general rule is that secured creditors so not have to file claims in bankruptcy, and that valid, perfected security interest flow through the debtor’s bankruptcy. I found a recent case in Hawaii with similar facts where a creditor filed an unsecured claim and found after the discharge order that its claim really was a secured claim. That court held that the filing of an inaccurate proof of claim does not by itself waive an otherwise valid security interest and that the creditor is not precluded from asserting its security interest unless the debtor has reasonably relied on the unsecured claim to his detriment.

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

Homestead Court Decision

A bankruptcy court in Tampa issued an interesting decision on the extent of homestead protection in Florida under the new bankruptcy law. The new bankruptcy law limits homestead protection of Florida bankruptcy debtors to $125,000 if they acquired their homestead interest within 1215 days prior to filing bankruptcy. Florida bankruptcy debtor’s who acquired their homestead prior to 1215 days of bankruptcy have unlimited homestead exemption under the Florida Constitution.

The new bankruptcy Code does not specify whether spouses filing jointly are entitled to aggregate separate $125,000 exemptions, and the Code did not fully define the type of legal and financial interest subject to the $125,000 cap. The Tampa bankruptcy court held that a husband and wife filing a joint bankruptcy petition may aggregate separate $125,000 homestead exemptions so that in a joint bankruptcy filing the spouses may exempt a total of $250,000 of homestead interest acquired within 1215 days of filing. The court further defined the "interest" subject to the applicable caps to exclude appreciation in value during the 1215 day period. So, for example, if a single debtor paid $100,000 down payment to purchase a homestead within 1215 days of filing, and that during the same period, the value of his homestead appreciated by another $100,000, the debtor could exempt in bankruptcy the total equity of $200,000.

If, on the other hand, assume the same debtor had no post-purchase appreciation, but prior to filing and within the 1215 day period he paid an additional $100,000 cash to reduce his principal mortgage balance so that on filing date he had $200,000 equity ($100,000 down payment and a subsequent $100,000 principal reduction). The bankruptcy court said that under those circumstances the debtor’s homestead exemption would be $125,000, and the debtor would have $75,000 non-exempt and unprotected equity in the homestead.

Of course, if the debtor in this example did not file bankruptcy his entire homestead equity would be protected from creditors regardless of his investments of cash in the property. If all cash investments were made prior to 1215 days of filing bankruptcy, the entire homestead interest would be protected in bankruptcy (with some exceptions).

The case is In re Rasmussen, issued September 6, 2006, by Judge Williamson.

Vacation

Blog suspended for my vacation through September 15, 2006.

Post-Filing Debtor Education

The new bankruptcy law has two separate debtor education requirements. Bankruptcy debtors must complete a financial education class prior to filing bankruptcy, and after filing they must complete a financial management class in order to get their bankruptcy discharge. One of my clients had their case closed without their discharge because they did not file a certificate of completing the second class, the financial management course.

Actually, the client did complete the class.. He just never sent us his certificate of completion and did not call to state that he completed the class so we could instruct him to mail it in. Before filing bankruptcy he mailed to our office his education completion certificate so we could file his bankruptcy. Our office assumes that when our clients mail in the first certificate in order to file they understand that they also must mail in the post-filing certificate. This client apparently assumed that the act of education itself, without notifying anyone, complies with the law. It doesn’t. We have since clarified the papers we provide our clients about bankruptcy education requirements. If you do something to comply with court rules or the trustee’s requirements please let your attorney, the court, or the trustee know about it.

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