Bankruptcy for Millionaires: Can I File Chapter 7 or 13 In Florida?

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Bankruptcy for MillionairesTrue or false: if I make a lot of money or have a lot of assets, then I can’t file for Chapter 7 or Chapter 13 bankruptcy in the state of Florida.

False.

Don’t fall for that common myth about bankruptcy for millionaires. Even if you have a high net worth, you’re eligible to file for Chapter 7 or Chapter 13. In fact, bankruptcy is a smart solution for many savvy business people whose entrepreneurial ventures fail, or who don’t have enough capital to satisfy their business liabilities. The advantages of bankruptcy can also help employees forced to take early retirement from a well-paying job.

For high-income earners, a big salary and lots of assets often means high monthly expenses, like an expensive mortgage and car payments. When that income slows to a trickle, however, those expenses can quickly mount. Bankruptcy can help alleviate the pressure you feel by discharging some of your debts. Here’s what you need to know about Florida bankruptcy limits and the process of filing bankruptcy for millionaires:

How high is your income?  

The bankruptcy court first looks at the income your household earned during the six month period before you file. If the average monthly income during that time is less than the median income of the state, then you automatically qualify. If that number is above the monthly median income, then you will have to pass the means test. The bankruptcy means test considers your average monthly household income, then subtracts some expenses and deductions, including certain debt payments. The amount left over is considered “disposable monthly income.” If that number is below a certain threshold, then you qualify for Chapter 7 debt relief. Want to find out if you pass the means test? Take an online bankruptcy means test here. (We’re glad to walk you through the nuances of this law. A free consultation with attorney Jeff Badgley will clarify where you stand.)

Is most of your debt business debt?

These income qualifications only apply if your debt is “primarily consumer debt.”  Excluded from the definition of consumer debt is debt incurred for business or investment activity, tax liability, and student loans.  If most of your debt was incurred in business or investment activities, then you may file Chapter 7 bankruptcy without regard to how much you earn.  

Your retirement accounts are off-limits to your creditors.

Under bankruptcy law, the entire amount of your 401(k)s, 403(b)s, Keoghs, profit-sharing plans, money purchase plans, and defined-benefit plans cannot be seized in Chapter 7, and will not affect how much you will pay toward your unsecured debts in Chapter 13. Traditional and Roth IRAs are a little different in that only $1,245,475 (per person) is exempt from your creditors. Any additional money over that amount can be used to pay back your debts.

Your home might be exempt under Florida homestead law.

If your house has homestead status, 100% of its value might be protected in both Chapter 7 and Chapter 13. You must have purchased your home 1215 days before your filing for this to be an option. (We’ll discuss even more possibilities for your home and property in a future post.)

There are still some debts you cannot discharge.

Student loans, child support, some types of alimony, condo or HOA fees, court fines, some taxes, and certain luxury credit card purchases are among the debts that cannot be wiped out with a bankruptcy filing.

For a free assessment of your particular situation, call bankruptcy lawsuit attorney Jeff Badgley at 407.781.0420 for a no-obligation consultation. Mr. Badgley’s years of experience as an attorney in Orlando courts help high net worth clients achieve an simple, straightforward bankruptcy experience.

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