A Chapter 13 bankruptcy in Florida allows the debtor to restructure his debt obligations in order to keep his non-exempt assets. In contrast, a Chapter 7 bankruptcy in Florida is a liquidation sale of a debtor’s non-exempt assets to pay off his debt obligations. The central issue in a Chapter 13 bankruptcy petition in Florida is the adequacy of the debtor’s Debt Repayment Plan.
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Effects of a Chapter 13 Bankruptcy Petition
Once a bankruptcy petition is filed, an automatic stay is issued. This automatic stay can stop foreclosure proceedings for as long as the debtor continues to make monthly mortgage payments through his Chapter 13 plan. It prohibits the commencement or continuation of a creditor’s judicial proceeding and other forms of debt collection against the debtor. An automatic stay, however, will not stop a sale that has already been completed via foreclosure proceedings. It is best to file the petition prior to a foreclosure sale.
Where to File
The state where the debtor files his bankruptcy petition depends on the state of residence. For bankruptcy purposes, the state of residence is the state where the debtor has lived for the past 180 days. If there have been multiple residences, it will be the state where he lived the longest during the 180-day period prior to the filing of the bankruptcy petition. Generally, a lot of debtors like to file their bankruptcy petition in Florida due to the liberal exemptions provided by state law for properties.
Income and Debt Eligibility
To be qualified for a Chapter 13 bankruptcy petition, the debtor must show that he has sufficient monthly disposable income in order to pay off his debts. Disposable income is defined as income (other than child support payments received by the debtor) less amounts reasonably necessary for the maintenance or support of the debtor or dependents and less charitable contributions up to 15% of the debtor’s gross income. 11 U.S.C. § 1325(b)(2)(A).
In addition, the debtor’s total unsecured debt must not exceed approximately $419,000 and $1,277,000 for secured debt, as of 2020. 11 U.S.C. § 109(e). Unsecured debts are debts that are not guaranteed by collateral, such as credit card obligations and medical bills. Secured debts are debts guaranteed by collateral such as car and home loans. These amounts may be changed periodicially depending on the consumer price index so it is best to consult with a lawyer before filing any bankruptcy petition.
Other Requirements to File a Chapter 13 Bankruptcy Petition
Other requirements to file a Chapter 13 bankruptcy petition in Florida are: (a) the debtor must have completed a credit counseling course within 180 days prior to filing (11 U.S.C. §§ 109, 111); (b) no prior bankruptcy petition must have been dismissed due to debtor’s willful failure to appear before the court or to comply with court orders or creditors’ seeking relief to recover property with liens in the past 180 days prior to filing (11 U.S.C. §§ 109(g), 362(d) and (e)); (c) debtor is an individual and not a corporation or partnership; and (d) all federal income tax returns due before and after the filing of the bankruptcy petition must be filed.
Documents Required for Chapter 13 Bankruptcy Petition
When filing a Chapter 13 bankruptcy petition, the following documents will be required: (a) original signed petition; (b) initial statement about an eviction judgment against the debtor (if applicable); (c) statement about the debtor’s social security number; (d) Certificate of Credit Counseling and Debt Repayment Plan (or certificate pursuant to 11 U.S.C. § 109(h)(3) or a request pursuant to 11 U.S.C. § 109(h)(4)); (e) creditor matrix (name and address of each creditor); (f) current government-issued photo ID; (g) payment of filing fee; (h) summary of the debtor’s assets and liabilities and certain statistical information, such as the debtor’s property, the exempt property, creditors who have claims secured by property, creditors who have unsecured claims, executory contracts and unexpired leases, co-debtors, income, expenses, statement of financial affairs, statement of current monthly income and calculation of commitment period, calculation of disposable income.
Once a petition is filed and an automatic stay is issued, the trustee will hold a meeting with the debtor and creditors who wish to attend. This is an informal proceeding that is not conducted before a judge. The trustee and creditors will ask questions about the debtor’s financial affairs. Generally, this meeting will center around the adequacy of the debt repayment plan proposed by the debtor. Disposable income is calculated using the average of the last six months of the debtor’s income. If the disposable income is not sufficient, the proceeding may be recommended to be converted to a Chapter 7 bankruptcy.
No later than 45 days after the creditors meeting, the bankruptcy judge will confirm and decide whether the debt repayment plan is feasible. Creditors will receive notice of this hearing and will be given an opportunity to object. Creditors will be represented by their lawyers, so it is best the debtor is also represented by a lawyer at this point. A number of objections may be made, but the usual objection is that the payments offered by the debtor are less than what the creditor could have received if the debtor’s assets were liquidated under a Chapter 7 bankruptcy proceeding.
Period of Repayment and Claims
Generally, the debtor must remit to the trustee his disposable income for the next three to five years (commitment period) until his creditors are paid in full. For secured debts, the plan must provide payment for at least the value of the collateral. For example, is the value of the car ($3000) is less than the mortgage value ($5000), then in the debt repayment plan, the debtor must at least pay the value of the car ($3000). Unsecured debts must be paid the amount they could have received had the debtor’s nonexempt assets been liquidated under a Chapter 7 bankruptcy proceeding.
Administrative claims have to be paid 100%. These include the filing fee, the trustee’s commission, and attorney’s fees. Priority debts also have to be paid 100%. These are most tax debts, wages, salaries, or commissions owed to employees, and contributions owed to an employee benefit fund.
In order to keep the property of the secured debts (such as a house or a car), one doesn’t need to pay the whole amount of the loan. The debtor must just pay the arrears in order for him to be up to date. After the commitment period, the debtor can enjoy paying the monthly amortization using the original term of the loan.
Unsecured debts can be paid anywhere from 0% to 100%, depending on the total value of the nonexempt property, the length of the plan, and the amount of disposable income.
A discharge is given after completion of all payments under the Chapter 13 Debt Repayment Plan. This discharge releases the debtor from all the debts provided for or disallowed by the plan. To be eligible for a discharge, the debtor must complete a second personal financial management course taken within 60 days after first date set for the creditors’ meeting.
Debts that cannot be discharged are include certain long term obligations (such as a home mortgage), debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime, to name a few.
Navigating a bankruptcy petition can be difficult, especially when the other party is adequately represented by a lawyer. It is always wise to seek legal counsel when undertaking a complicated proceeding such as bankruptcy. Should you need assistance in filing a Chapter 13 bankruptcy petition in Florida, we, at the Law Offices of Albert Goodwin, are here for you. Our lawyer, Albert Goodwin, is qualified to practice law both in Florida and New York. You can call us at 212-233-1233 or send us an email at [email protected].