Filing Chapter 13 in Florida

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Chapter 13 bankruptcy allows a Florida debtor to reorganize his debts and repay them over a three to five year period. Unlike Chapter 7 bankruptcy, which typically results in a liquidation of the debtor's non-exempt assets, Chapter 13 allows the debtor to maintain possession of these assets, even those pledged as security for a loan.

Chapter 13 Filing Requirements

To qualify for Chapter 13 relief, a debtor must meet the following requirements:

  • Have stable and regular income sufficient to make the required plan payments
  • Have unsecured debts totaling no more than $360,475
  • Have secured debts totaling no more than $1,081,400
  • Complete pre-bankruptcy counseling
  • Pay the required filing fee; with permission of the court, the filing fee may be paid in installments

To initiate a Chapter 13 case, the debtor must file the bankruptcy petition and schedules, the certificate of completion for the pre-bankruptcy counseling class,  and the Chapter 13 plan.

The Chapter 13 Plan

The Chapter 13 plan is the debtor's proposal for repaying his debts. The Bankruptcy Code generally requires that a debtor commit 100 percent of his net disposable income into the plan for repayment of his debts. The bankruptcy court must approve (confirm) the Chapter 13 plan; if the plan is not approved by the court and the debtor is unable to offer a feasible plan which the court will approve, his case will be dismissed.

The Bankruptcy Code requires that mortgage arrearages, auto loans and other secured debts be paid in full during the term of the Chapter 13 plan. All priority debts, such as student loans, taxes and family support obligations, must be paid in full during the term of the plan. Whether unsecured debts will be paid depends on the composition of the Chapter 13 plan. However, it is not uncommon for unsecured creditors to receive only a small fraction of what they are owed.

Benefits of Filing Chapter 13

One of the biggest benefits of filing bankruptcy in Florida is the automatic stay. The automatic stay is an injunction against creditors which prohibits them from commencing or continuing collection efforts against the debtor. The automatic stay becomes effective immediately upon the filing of the bankruptcy petition with the court, and prevents a wide variety of creditor actions including but not limited to:

  • Wage garnishment
  • Foreclosure
  • Repossession
  • Lawsuits
  • Collection phone calls and letters

Another benefit of filing a Chapter 13 case is that it may allow a debtor to reduce the balance and/or interest rate on certain home mortgages through a process known as lien stripping. Lien stripping is not available on Chapter 13 Florida homestead property having only a first mortgage. However, it may be utilized on Florida homestead property having a second mortgage and on investment property where the debtor owes more the property is worth.

Chapter 13 bankruptcy may also be used to reduce the amount owed on certain auto loans to the present value of the vehicle. This process is known as a "cram down."

Upon successful completion of the Chapter 13 plan, the debtor will receive a discharge. The Chapter 13 discharge is much broader than the Chapter 7 discharge.

Getting Legal Help

Chapter 13 bankruptcy is a very complex process which requires the skill and expertise of a Florida bankruptcy attorney. A bankruptcy attorney assists debtors in all aspects of a Chapter 13 case, including preparation and filing of the petition and schedules, formulation of the Chapter 13 plan and representation at all hearings related to the case.