Saturday, June 16, 2012

Bankruptcy Law and the States

Although federal bankruptcy law mainly regulates bankruptcies, the individual states can have specific guidelines for the process within their jurisdiction. States can typically choose to have their own rules that govern the types of exemptions that the debtor is allowed to keep after filing for a discharge of their debts.

For instance, some states will allow debtors to keep their homes no matter how expensive or extravagant they are whereas other states will force the liquidation of property as an attempt to pay off the debts. Other variations include the types of debt that a debtor can discharge, although many of these are federally mandated without exception.

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 0 worth of household goods and furnishings as well as ,000 of cash in their bank accounts. Also according to Maryland bankruptcy law, debtors can only retain up to ,500 worth of personal property and the rest must be sold or liquidated so the proceeds can go towards paying the creditors.

Different states have varying guidelines regarding bankruptcy law, but each category has specific regulations, too. In a Chapter 7 bankruptcy, for instance, you can have many of your debts completely discharged so you can get a fresh financial start.

On the other hand, Chapter 13 bankruptcy requires you to enter into a repayment agreement that the courts will oversee and make provisions to help you pay off your creditors in a timely manner. Rules also vary as to how much of your property you are allowed to retain when going through a bankruptcy.

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.

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