Many of the creditor protections that Florida residents appreciate are significantly reduced or eliminated in the event of bankruptcy. This is because the powers of the bankruptcy trustee are very broad and the superiority of federal bankruptcy law over state law is well-established in our country. For example, generally under Florida law a debtor enjoys an unlimited exemption from creditors for their IRA, whereas in bankruptcy this amount is limited to approximately $1.7 million. Similarly, subject to certain restrictions a Florida residents enjoy an unlimited homestead exemption from forced sale by creditors, whereas in bankruptcy, there can be a cap of approximately $146,500 if an individual purchased the homestead within a certain period before filing a bankruptcy petition.
A well-designed asset plan should significantly reduce, if not eliminate, the need for a debtor to declare bankruptcy. Indeed, the sense of security a person feels when they know their asset protection plan is in place and working for them is a well-deserved one. Of course, creditors and their attorneys are well-aware of Florida’s reputation as a debtor-friendly state. Thus, if a creditor does not like their chances in state court, they may seek to force the debtor into involuntary bankruptcy proceedings.
An involuntary bankruptcy can occur when an individual or business organization is forced into bankruptcy proceedings by their creditors. In an involuntary bankruptcy proceeding, the creditor, rather than the debtor, originates the bankruptcy by filing the petition with a bankruptcy court. There are specific requirements a creditor must meet before initiating involuntary bankruptcy proceedings. Some of these include: determining who can file; determining how many creditors the debtor currently has; determining whether the debtor is of the type that can be forced into involuntary bankruptcy; and determining which kind of bankruptcy action is appropriate.
While it is true that only a small number of cases start with an involuntary petition, it is important to consult an attorney who is familiar with this type of case and capable of preparing for the possibility that one will be forced upon you, your business, or your family. Speaking with an estate planning attorney who is familiar with asset protection matters helps you gain a perspective on how and when an involuntary bankruptcy may factor into your personal situation. If you have questions about involuntary bankruptcy, your asset protection plan, or estate planning in general, contact Ourednik Law Offices to speak with one of our experienced asset protection and estate planning attorneys today.