Bankruptcy is the legal way to help eliminate debt that is beyond one’s ability to pay. It is a Federal program. The Federal Government decides the guidelines for all chapters of bankruptcy, with each state having district courts to handle judicial rulings. Thus, you will hear the term “bankruptcy court” separate from other kinds of court. In Chapter 7, all assets of saleable value will be sold with the proceeds being divided as equitably as possible between creditors. Assets are determined to be exempt or non-exempt. An exempt item will not have to be sold; a non-exempt item will. The court will appoint a United States Trustee
to sell the assets and make the distribution of monies. For bankruptcy Chapter 7, the Federal Government has provided a list of what will be considered exempt. However, each state can provide its own list or use a combination of both lists. As each state has its own procedures in the area of exemptions, this article will focus on Florida.
In Florida, the Bankruptcy Courts will use an exemption list provided by the state. The following list includes most of the exemptions (sometimes individual exceptions are made such as exempting a student loan which usually is not exempt) and can be paraphrased as follows:
- Personal property up to $1,000
- Motor vehicles valued at less than $1,000 but can be slightly higher if a couple is married and filing jointly
- Homestead exemption if the person (or couple) filing has owned their home 1,215 days before filing. The homestead can be no larger than one-half acre within a municipality or l60 acres outside a municipality.
- A wild card is a term used to explain that if a person does not use the homestead exemption, he, she, or they, can claim an additional $4,000 in personal property.
- Categories (each category has several sub-categories which can be found on-line under Florida Bankruptcy guidelines for exemptions, in the Florida statutes for Bankruptcy, and the Florida Constitution as they are too numerous to list here and would be of interest to only those with particular concerns involving a category.
–insurance policies and annuities
–wages
–pensions
–personal injury
–public benefits
–tools of trade
While it is possible to file for bankruptcy without the help of an attorney, it is not wise to do so. Just understanding all the possible sub-categories can be tricky. And, if you are not careful, you could miss an exemption that might even be worth more than the cost of legal representation. Bankruptcy filing goes on a person’s credit standing and stays there for up to 10 years, so be sure there is no other way to resolve your debt problem before filing. There are free, government credit counseling courses available. In fact, you will be required to take one of these courses within 180 days before filing. Too, sometimes banks and credit cardholders will work with you to set up a payment plan you can handle. It is best to stay out of bankruptcy court if you possibly can.