Credit card debt is a primary factor leading to personal bankruptcy in Florida. Consumers facing job loss or medical bills often find themselves indebted to several credit card companies. These credit card creditors typically act aggressively to collect unpaid credit card bills. They may contract with professional debt collectors or file lawsuits against their credit card customers. Faced with an onslaught of litigation and nasty bill collectors, many credit card debtors believe that Chapter 7 bankruptcy is the only way to protect themselves.
Successful bankruptcy does wipe out all of a person’s credit card debt as well as any other unsecured debts including car loans, medical debt, and mortgage deficiency judgments. There are problems and risks involved in bankruptcy for many credit card debtors. Debtors have to pass a “means test” in order to qualify for bankruptcy. Bankruptcy causes debtors to forfeit all assets not exempt under bankruptcy law, and fewer assets are exempt in bankruptcy than in state court collection. Experienced and very competent bankruptcy trustees, working on a contingency fee, can challenge asset exemptions and pursue legal challenges to prior fraudulent transfers and preferential payments to creditors.
In Florida, most people facing credit card debt can avoid the risks of bankruptcy. Because Florida non-bankruptcy law protects assets and transfers that are vulnerable to a bankruptcy trustee these debtors can retain more assets and achieve favorable legal action by defending the credit card company collection through state court proceedings.
For example, Florida homestead law protects the owner’s homestead from creditors regardless of when the debtor acquired the homestead. The Florida Constitution places no monetary ceiling on homestead protected property. Money used to purchase or improve a homestead cannot be challenged in state court as a fraudulent conversion even if the homestead was acquired or improved after the debtor was sued. Bankruptcy law protects only limited amounts of homestead equity acquired within 40 months of filing bankruptcy. The bankruptcy trustee may challenge and reverse the debtor’s purchase of a Florida homestead within 10 years of the bankruptcy filing.
Bankruptcy is not a good option for recent Florida residents. Florida’s generous homestead protection and other exemption laws apply to all Florida residents immediately upon establishment of Florida residency. There is no waiting period for the benefits of Florida’s asset protection law. In bankruptcy, a new Florida resident cannot use Florida’s homestead exemption and other Florida protections for 24 months after moving to Florida. The new Florida resident has to use exemption law in the state of his former residence, and these laws are usually less advantageous in bankruptcy court.
Bankruptcy trustees are generally speaking more effective debt collectors than the collection attorneys who represent credit card companies. Bankruptcy trustees have jurisdiction over all of the debtor’s assets wherever located in the U.S. A credit card judgment is only good in the state where the lawsuit was filed, and the judgment does not affect the cardholder’s real estate or financial accounts situated in other jurisdictions.
Florida’s asset protection laws give credit card debtors the ability to protect most of their assets from credit card judgments outside of bankruptcy. Effective asset protection planning will enhance the debtors negotiating position with credit card companies . People who engage in asset protection instead of bankruptcy achieve better settlements and results than those who subject all their assets to examination and attack by a bankruptcy trustee. .