The Florida Bankruptcy Law Blog

Does Owning Florida Real Estate Confer Eligibility To File Bankruptcy In Florida?

An attorney called me today to ask me about his client who had moved from Florida to Ohio a few months ago to take a new job and establish a new residence The same client still owned a piece of real property in Florida which was his former Florida homestead. The attorney understood that the client would not be eligible for Florida exemptions because the debtor no longer domiciled in Florida. The question was whether or not the client could file bankruptcy in Florida because he retained ownership of Florida property.

The bankruptcy law privies that a debtor may file bankruptcy in any federal district in which the debtor’s domicile, place of business, or principal assets have been located for the greater part of the preceding 180 days. The law does not state a debtor may file wherever he owns property or has a residence. Filing is permitted where the debtor owns most of his property and where he primarily resides. This attorney’s client could not file bankruptcy in Florida if most of the client’s assets have been relocated in Ohio.

The general rule gives some debtors a choice of where to file bankruptcy. For example, a debtor who resides  in Ohio and runs a business in Florida, or has most of his assets in Florida, may chose to file bankruptcy in either Florida or Ohio.  is subject to court discretion to maintain a bankruptcy filed in the incorrect venue for reasons such as convenience of parties or case administration.

When Bankruptcy Benefits Criminals? Comparing O.J. And Casey.

After reading and considering  my posts regarding legal issues in a Casey Anthony bankruptcy, an attorney sent me an email asking why O.J. did not file Chapter 7 bankruptcy. He asks why would bankruptcy work for Casey if it did not work for O.J.

Chapter 7 bankruptcy does not permit the debtor to discharge damages caused by the willful and malicious injury by the debtor to another person. This is important for the debtor only if there is a person entitled to damages and who is willing to sue for damages. The law permits some relatives of a deceased person to sue the person who caused the death. A common example are relatives who sue for “wrongful death” related to medical malpractice or a car accident.

In the O.J. case there were relatives of Ron and Nicole who had no allegiance to O.J. and who were able to sue O.J. to recover damages on behalf of their deceased relatives. Ron’s parents and Nicoles’s sister sued O.J. for intentional harm O.J. caused Ron and Nicole. Bankruptcy would not have stopped these lawsuits. In Casey’s situation, there are no obvious candidates to sue on behalf of Kaylee. Casey’s parents might sue ( I don’t know that area of the law), but if they could sue they are probably not motivated to sue their daughter, and furthermore, they probably do not want subject themselves to another round of testimony and invasion of privacy. Also, what could they recover? O.J. , and ex-football star, had money; Casey is currently broke and future earnings are speculative.

For these reasons, Casey Anthony will file bankruptcy whereas O.J. Simpson would not have benefitted from bankruptcy. The attorney’s  email raised an interesting question. Another example of why Casey Anthony poses  a real-life bankruptcy law study question.

Do Pre-Filing Withdrawals From Pension Or IRA Count As Means Test Income?

Whenever I get an email question from one bankruptcy attorney I assume many other bankruptcy attorneys new to the practice have the same question. An attorney asked me, “are a few withdrawals form a 401k to pay off credit cards...listed as income under the CMI for Chapter 13?”

My understanding is that withdrawals from qualified retirement plans (pension, IRA) within six months prior to filing bankruptcy are included as income for purposes of the means test. Large amounts of income from retirement accounts may disqualify a debtor from filing Chapter 7 in which case the debtor should postpone filing Chapter 7 until the retirement withdrawals “age” beyond the six month means test look back.

On the other hand, if the debtor chooses to file Chapter 13 bankruptcy the pre-filing pension withdrawals will not be used to calculate available income to fund a Chapter 13 plan. In other words, the pension withdrawals will not increase the plan payment amount.

Number Of Tax Dependents Does Not Determine Household For Bankruptcy Means Test

Here’s a question from a bankruptcy attorney in South Florida which touches upon an important and very basic concept for the bankruptcy means test. The attorney states that he represents a Chapter 7 client who has been in a domestic partnership for a long time. He and his partner have two children. The client claims himself and  one of the children as a dependant for income tax purposes. The attorney asks if the debtor includes only his income and the expenses of the child he claims as tax dependent, or household income.

The answer is household income. For bankruptcy purposes, the debtor’s household includes all the people living in the home as a primary residence regardless of whom is claimed as a dependent for tax purposes. This debtor’s means test should include everyone’s income and everyone’s household and living expenses.

Is It An Automatic Stay Violation If Doctor Refuses To Treat Bankrupt Patient Unless He Pays Doctor's Pre-Petition Medical Bill?

Here’s an interesting issue that circulated on a bankruptcy attorney listserv. A debtor files bankruptcy because he cannot pay credit card and medical bills. After he files his petition, he returns to one of his doctors for treatment on an ongoing illness. The debtor had listed on his bankruptcy schedules a bill to same doctor for treatment rendered and billed prior to the bankruptcy. The doctor says he will not further treat the debtor’s illness until and unless the debtor pays the doctor’s past due bill.

The doctor’s position is common sense. Why should a doctor, or anyone else, continue providing services to a patient who has not paid bills for the prior services? The issue is whether the doctor’s insistence on payment of a bill listed on the debtor’s petition is an illegal violation of the bankruptcy stay.

One of the listserv attorneys found a case on this issue decided 25 years ago. A bankruptcy court held that a physician’s service contingent upon payment of a scheduled prior medical bill violated the automatic stay and entitled the debtor to an award of sanctions against the physician. The court said the physician was free to simply deny treatment to the bankruptcy patient, but he could not leverage his professional services to compel payment of a discharged medical debt. 38 B.R. 515

Does A Workers Compensation Settlment Count As Income In Means Test Analysis?

A bankruptcy attorney sent me an interesting question about treatment of workers compensation benefits in the Chapter 7 means test calculation. Workers compensation payments are exempt from creditor garnishment outside of bankruptcy, and debtor’s accumulated worker’s compensation is exempt in bankruptcy. This attorney’s client had recently received a significant lump-sum workers comp settlement. The attorney knows the money is not part of a Chapter 7 bankruptcy estate, but he ask whether the money counts as income in his clients means test. If it is income, his client would have to wait six months after the settlement in order to pass the means test. (The means test considers household income during the prior six months).

I think workers compensation receipts are included as means test income. It doesn’t make any difference if the debtor receives monthly checks or a lump-sum settlement. The means test is independent of exemption analysis. Workers compensation is one of several examples I’ve encountered with my bankruptcy clients where money exempt from creditors and exempt in bankruptcy can still cause a debtor to fail the means test for Chapter 7 bankruptcy.

This attorney’s clients needs to sit back and wait until six months after his workers compensation settlement. When he does qualify for Chapter 7, the remaining settlement proceeds should be exempt as long as he can trace funds in his financial account to the settlement check.