Bankruptcy
- An Overview
Filing
bankruptcy is an important legal right. The
Bankruptcy Code provides for six separate types of bankruptcy
proceedings. Chapters 9 and 12 are available only to municipalities
or family farmers. Chapter 15 concerns foreign
proceedings. Chapters 11 and 13 are 'plan' bankruptcies, requiring payments over time. Chapter 7 is by far the most often used chapter, allowing both individuals and businesses to liquidate. See our
separate discussions on Bankruptcy
Planning and Involuntary Bankruptcies.
Chapter
7
A
Chapter 7 liquidation proceeding is available to individuals,
partnerships, and corporations. The debtor is allowed to keep
exempt assets. For individuals filing bankruptcy in Florida, the
exemptions are primarily determined by Florida law. They include
the debtor’s homestead, (subject to a cap of about $136,000.00
in equity if owned less than 1215 days), a debtor’s interest,
not to exceed $1,000.00 in a single motor vehicle, a debtor’s
interest in any professionally prescribed health aids, monies
paid into the Prepaid Post-Secondary Education Expense Trust Fund,
and $1,000.00 per individual in miscellaneous personal property.
Individuals not claiming a homestead as exempt can claim an additional $4,000.00 of any type of property as exempt. Certain other assets such as the cash surrender value of life
insurance policies, annuity contracts, IRA’s and pension
plans may be exempt also. All non-exempt assets must be turned
over to the Chapter 7 trustee for liquidation and distribution
to creditors.
For individuals
filing Chapter 7, most debts, including some tax obligations,
are discharged. Some debts, including recent
tax obligations, trust fund obligations, child support and alimony
generally cannot be discharged. Other debts may not be discharged
if the creditor can prove improper conduct on the part of the
debtor.
Most
individuals are unaware that they may be able to discharge some
or all of their older income tax obligations in Chapter 7. See our discussion of Dischargeability
of taxes. The filing of a Chapter 7 stays all
collection proceedings until the entry of a discharge or dismissal
of the case.
This
article is not intended as a substitute for competent legal or
accounting representation, but merely as a guide to help you decide
whether you need the services of a licensed attorney or CPA.
David
W. Langley is licensed to practice only in the State of Florida and handles bankruptcy cases in Miami, Hollywood, Fort Lauderdale, Plantation, Pembroke Pines, Pompano,Coral Springs, Deerfield, Boca Raton, Delray and West Palm Beach.
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