Florida Bankruptcy Law Blog

Where Does Mobile Debtor File Bankruptcy?

It is often said that we live in a mobile society. Under the new bankruptcy law, mobility sometimes creates a puzzle when a debtor has to decide where to file bankruptcy and what state’s exemptions apply. Consider the example posed by a caller who last week told me he wanted to file Chapter 7 bankruptcy. The prospective debtor rented an apartment in Florida for over two years. Then, he resided in his brother’s apartment in Nevada, but he kept his lease for the Florida apartment. The Nevada lease was in his brother’s name. He helped pay his brother’s expenses. Last month, he moved to Colorado where he rented another apartment. He stated he intends to stay in Colorado and look for permanent work. The Florida lease is still current. He has a Nevada drivers license. He did not file tax returns for 05 or 06, but the last time he did file a tax return in 04 he listed Florida as his residence. Where does he file bankruptcy, and what state’s laws determine his exemptions.

Exempt property in Chapter 7 bankruptcy is based on the exemption laws of the state where you last resided for a period of two years. In this instance, Florida is the last state where the prospective debtor resided for two years. A bankruptcy petition must be filed in the state where you currently reside. Your residence is in the state that you consider to be your permanent home. At this point, I think this person intends to permanently reside in Colorado even though he does not have a job in Colorado and does not own property in Colorado. He expressed no intent to return to either Florida or Nevada as his permanent residence. I believe this debtor files bankruptcy in Colorado under Florida exemption law.

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

Dollar Amount Changes in New Bankruptcy Law Effective April, 2007

There are changes in the new bankruptcy law of interest to Florida debtors. The new law provided for automatic inflation adjustments in certain dollar indices. There are many adjustments going into effect in April, 2007. Most important for Florida debtors is the homestead exemption in bankruptcy which increases from $125,000 to approximately $137,000 per person. Debtors who have lived in their homestead for two years or more have an unlimited homestead exemption in Florida. As previously pointed out on this Blog, all Florida residents who are not in bankruptcy have unlimited homestead exemption regardless of how long they lived in their house.

Another significant change April 1, 2007, are debt limited for filing Chapter 13 bankruptcy. The maximum amount of unsecured Chapter 13 debt increases from about $307,000 to approximately $337,000 on April 1, 2007. The maximum amount of secured debt increases from about $923,000 to approximately $1,010,000. Debtors whose debt exceeds the debt limits must look for relief under either Chapter 7 or Chapter 11.

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

Protecting Successive Florida Homesteads in Bankruptcy

A reader asked me to address a situation where a Florida resident owned a homestead property for 30 months and sold the house. Within a reasonable time after the sale, he bought a new homestead where he then lived for 45 months prior to filing bankruptcy. The question is whether the reader would in bankruptcy get Florida’s unlimited homestead protection which is available for people who have owned their homestead for 40 months or more.

The new bankruptcy law specifically addresses this situation. The law provides that previous ownership of a homestead in the same state can be tacked on the time of ownership of the existing homestead. So, if this person first house and transfers the net proceeds into the second house he will be deemed to reside 45 months in his Florida homestead when he files bankruptcy. Again, both homesteads must be located in Florida to combine time residence.

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

Which Homestead Exemption Applies to Filing Prior to October, 2005?

Bankruptcy cases involving debtors who file bankruptcy after recently moving to Florida involve interesting issues. I discussed with another bankruptcy attorney this week a debtor who filed bankruptcy in September, 2005, one month before most provisions of the new law went into effect. He invested about $70,000 in a Florida homestead one year prior to filing and about the same time he had moved to Florida from a state with a small homestead exemption of $25,000. The homestead provisions of the new bankruptcy Act which limit Florida debtors to no more than a $125,000 if they purchased their homestead within 40 months of filing went into effect in April, 2005, when the Act was passed. A trustee argued that since he purchased the homestead after April, 2005, all homestead issues are under the new bankruptcy law. One part of the new bankruptcy law says that if you move to Florida within two years of filing bankruptcy in Florida, your exemptions are determined under the laws of the state you came from. The Trustee concludes that as to this debtor’s homestead, his exemption is limited to the $25,000 applicable in the state of his previous residence.

I think the trustee argument confuses the effective dates of difference provisions of the bankruptcy Code. The new bankruptcy law become effective on October 17, 2005 with certain exceptions spelled out in Section 1501(b)(2) of the Act. One of the exceptions was the $125,000 homestead limit. However, the Code section that applies exemptions of a prior state residence to debtors who moved to Florida more than 180 days prior to filing is part of a different section of the Act, and that different section was not one of the sections which became effective in April, 2005. As this person filed bankruptcy prior to October, 2005, and more than 180 days after moving to Florida, his bankruptcy was under the Florida homestead exemption which after April, 2005, gave this debtor a $125,000 exemption. Therefore, I believe, the debtor’s investment of about $70,000 in his new Florida homestead should be exempt. We’ll see.

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

An Alternative Attack On Florida Homestead

Most people think the main impact of the new bankruptcy law upon Florida homestead protection is the $125,000 limitation on the exemption for debtors who acquired equity in their home within 40 months of filing bankruptcy. I am involved in a case where another feature of the new bankruptcy law is being used to attack the debtor’s homestead exemption. A new Section 522(q)(1) of the Code provides that a debtor may not exempt more than $125,000 of homestead equity regardless of when he acquired the homestead if the debtors owes a debt on account of a criminal act, an intentional tort, reckless misconduct or a civil remedy under RICO laws. Civil fraud, often alleged in civil complaints, falls within the category of intentional tort.

If a creditor files a claim which alleges a debt arising out of the these above categories the debtor would have to object to the claim and defend the allegation in a separate bankruptcy adversary proceeding in order to protect homestead equity above $125,000. If the debtor owned a homestead jointly with a spouse the protected equity would probably rise to $250,000. Creditors could gain leverage against bankruptcy debtors by basing claims on the wrongs listed in Section 522(q)(1).

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

Disability Income From Private Disability Insurance

The new partnership law excludes social security disability from computations of monthly income when the debtor determines whether he is under the applicable median income and exempt from means testing. A client today received both social security disability and additional disability income from a private disability insurance policy. As far as I can tell, the private disability is counted in computing his monthly income and means test eligibility. In most cases, people who are receiving disability will not be making enough money overall relative to their expenses to flunk the means test. I would appreciate hearing if my treatment of private disability income is incorrect.

Definition of "Household" For Means Test

The new bankruptcy law says that you automatically can file for Chapter 7 bankruptcy without further means testing if your average monthly income over the prior six months is below Florida's median income. The applicable median income depends on your household size. Many people are unclear how to determine the size of your household, and particularly, how household size is related to family size. More than one blog reader has asked me questions about household definition. The new bankruptcy law does not make clear the definition of household for determining if a particular debtor is below the applicable median income.

I came across a helpful explanation which was posted on a listserve for bankruptcy lawyers. The post explained:

" A household consists of all people who occupy a housing unit regardless of relationship. A household may consist of a person living alone or multiple unrelated individuals or families living together. Households thus are subdivided into family and nonfamily households.

A housing unit is a house, an apartment, a mobile home or trailer, a group of rooms, or a single room occupied as a separate living quarters, or if vacant, intended for occupancy as separate living quarters. Separate living quarters are those in which the occupants live separately from any other individuals in the building and which have direct access from outside the building or through a common hall. For vacant units, the criteria of separateness and direct access are applied to the intended occupants whenever possible. "

I hope this posted definition helps you understand the size of your household for purposes of the means test under the new bankruptcy law.

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

Marriage During A Bankruptcy

The new bankruptcy law adds many "curves" to consumer bankruptcy. One such issue is the effect of marriage after one spouse has filed bankruptcy. The new bankruptcy law in both Chapter 7 and Chapter 13 considers earnings of a non-filing spouse as well as changes in income and expense after the filing date. If a debtor who was unmarried when they filed bankruptcy chooses to get married to a working spouse reasonable soon after the filing date, the marriage could affect the bankruptcy. For example, a Chapter 13 debtor could be forced to amend the bankruptcy plan to increase monthly payments so as to take into consideration the earning contribution to family income of the new, working spouse. One way to prevent marriage from impacting an ongoing bankruptcy is for the spouses to enter into a marital contract that segregates by contract spousal earnings and expenses. In any event, marriage during a pending bankruptcy is more significant under the new bankruptcy law.

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.

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