Bankruptcy Law and the States
Although states have different rules and guidelines regarding
bankruptcies in their individual jurisdiction, the federal
government has final say regarding bankruptcy law. Some states
require complete liquidation of a debtor's assets as a means to
repay creditors. On the other hand, some states allow the debtor to
retain most of their property and require them to enter into a
mandatory repayment plan that is handled by a court-appointed
trustee. State guidelines must not contradict federal guidelines,
though. In cases where this happens, the federal guidelines are the
ones that the courts must adhere to.
Florida bankruptcy law heavily favors debtors in regards to the
property that they can retain. In fact, Florida has a reputation for
being one of the most liberal states in the country for debtors to
petition for a discharge of debts. The state government has elected
to opt out of the federal regulations concerning the debtor's
lawfully retainable property. According to Florida bankruptcy
proceedings, you can keep more of your personal property during a
bankruptcy than in any other state. As a result, many people who
plan to file often move to Florida with their assets in order to
take advantage of the state's lenient bankruptcy law.
To see a contrast in the how the bankruptcy law changes from state
to state, look at the exemptions that the Maryland law allows.
Maryland is stricter in regard to the debtor's assets that must be
liquidated in a bankruptcy. For instance, a debtor who files
bankruptcy in Maryland is only entitled to keep $500 worth of
household goods and furnishings as well as $3,000 of cash in their
bank accounts. Also according to Maryland bankruptcy law, debtors
can only retain up to $2,500 worth of personal property and the rest
must be sold or liquidated so the proceeds can go towards paying the
creditors.
Not only do the states have differing laws that affect bankruptcy
exemptions, but the exemptions and guidelines also pertain to the
differences in the bankruptcy chapter that the debtor files. For
instance, debtors who file for Chapter 7 bankruptcy have the option
of having their debts completely discharged but their assets are
typically liquidated to help repay the creditors. For a Chapter 13
bankruptcy however, debtors are placed on a repayment schedule and
they can keep their homes and other personal property as long as
they continue to make the required payments.
Although federally regulated, bankruptcy law hinges on the
guidelines of the individual states and the bankruptcy chapter that
the debtor chooses to file. While some states have lenient laws that
favor the debtor's situation, the bankruptcy laws in other states
tend to favor the creditor. Until the recent amendments to the
federal bankruptcy code, the federal guidelines favored the debtor,
but those times have changed and now it is much more difficult for a
debtor to completely discharge their debts. As a result, many people
either try to find solutions through loopholes in the system or they
deal with the ramifications that filing for bankruptcy will have on
their financial future.
