You will not lose everything when you file for bankruptcy. Many people hold the misconception that, if they file bankruptcy, they will lose their home, car and the clothes off their back. Bankruptcy is not quite that extreme.
There are certain protections for people who file for bankruptcy in the state of Florida. For example, consider the Homestead Exemption. The Homestead Exemption is a provision that protects a person’s home from bankruptcy proceedings, provided they meet certain standards of residency in the state and time living in the home. In fact, it has been very rare for our office to come into contact with a person who will lose their main residence.
The Homestead Exemption does not apply to investment properties. However, when it comes to your primary residence, it is most likely you will be able to keep your home, no matter the equity. There are some scenarios where equity will come into play, though that’s generally only if you haven’t been in the home for a consistent period.
If you’re in foreclosure and you’re filing a bankruptcy, a chapter 13 filing may help you save your home in some circumstances. A chapter 7 bankruptcy filing will not help you to save it if you are in foreclosure, but it will not be the court that will take your home.
The rules around automobiles and bankruptcy filings differ from those around homes. If you owe more money than the value of the car, your car is likely going to be safe. You will be able to file bankruptcy, keep making your car payments, and should be fine post-bankruptcy.
However, if you have equity in your car, whether or not you will lose it will depend on how much equity you have. This outcome will depend upon your circumstances and upon the kinds of exemptions you get from the court. There is a motor vehicle exemption in Florida which may be applicable in some scenarios.
There is what is called a “wild card exemption” in Florida which creates an opportunity to apply extra exemptions to a vehicle when the filer does not own a home. If you own your car outright, you may be able to find a full exemption for the vehicle depending on its value.
There are times when a car is worth more money than I can exempt. If you are over-exempt, whatever equity is not approved for exemption will need to be repaid to the court. You would not necessarily lose your car if you can afford to make these payments. However, if you are not able to make the payments, you would likely be in a situation where you may lose a car.
Furniture, clothing, electronics, and other personal effects of that nature are usually exempted, as well.
There are, of course, specific factors that may change the outcome of what may or may not be exempt in bankruptcy filings. Most commonly, our clients are able to see outcomes wherein they do not lose ownership of their primary homes or vehicles. The best way to gain a clear picture of how your assets may be affected when you file for bankruptcy is to speak to an attorney who can advise you on your unique situation.
What Is A Chapter 13 And How Does It Differ From Chapter 7?
Chapter 13 bankruptcy filings are for the restructuring or reorganization of debt.
Chapter 7 bankruptcy filings are usually completed over the course of three to three and a half months and usually constitute lower attorney fees because of the shorter timeframe. After you make your initial filing for a chapter 7 bankruptcy, you will usually see your meeting with the court in a month or two. After which, you should receive your discharge and your case will be closed.
The process for Chapter 13 filings usually takes around three to five years. In these filings, as you are restructuring your debt, you are still required to make payments to your creditors. In this situation, you will be making a single payment to a Chapter 13 Trustee who will then disburse the money to the different creditors.
These payment amounts are determined based on a number of factors. These factors may include: your disposable monthly income after expenses, any non-exempt assets, any late fees you need to catch up on for a mortgage or car payment, and more. In addition, there is a 10% fee due to the trustee and payments toward your attorney’s fees.
In a Chapter 13 bankruptcy, you propose a payment plan. These plans are confirmed by the court around six months from the time the plan was initially presented. At which point, you remain in the bankruptcy process for an average of 5 years.
There are cases in which people can have their proposals approved for a 3-year period, as opposed to a 5-year period. However, if you file and do not qualify for a chapter 7 bankruptcy, you are required to submit to a 5-year period in your chapter 13 filing.
These payments are made monthly until your case is paid in full. If your income increases, your payment may increase; if your income decreases, you will likely still need to make the same payment that was agreed to in your filing.
These filings can be very stressful, very demanding, and very expensive. However, there is an immense relief to be had in the end. When you have completed your bankruptcy filing and all your payments, you are in a position wherein you have paid only a portion of your debt, as opposed to the total sum you were responsible for, and the rest goes away. Additionally, chapter 13 bankruptcy filings can provide an opportunity for families or individuals in foreclosure to save their homes, which is not an option available in almost any other way.
For more information on Bankruptcy Law in Florida, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (407) 305-5599 today.