When We Tell Miami Clients Not to File Bankruptcy

A bankruptcy practice earns its keep in two ways: by filing cases that should be filed, and by stopping cases that should not be. A Chapter 7 or Chapter 13 petition is a powerful tool, but it is also a public court proceeding that stays on a credit report for up to ten years, exposes every asset to a trustee's review, and can be used only at long intervals. For a significant share of the people who sit down with us, the honest answer is: not now, or not at all. This page explains the situations in which we give that advice and what we recommend instead.

You May Already Be Judgment-Proof

Florida gives debtors some of the strongest exemption protections in the country, and many Miami clients are protected without filing anything.

• Homestead: Article X, Section 4 of the Florida Constitution protects a primary residence of unlimited value (up to half an acre inside a municipality such as Miami) from forced sale by ordinary judgment creditors.
• Wages: Fla. Stat. § 222.11 bars garnishment of the wages of a head of family earning $750 or less per week, and requires a written waiver before higher head-of-family wages can be garnished.
• Retirement and government benefits: Fla. Stat. § 222.21 exempts qualified retirement accounts such as 401(k)s and IRAs. Social Security benefits are exempt under 42 U.S.C. § 407.
• Annuities and life insurance: Fla. Stat. § 222.14 exempts annuity contract proceeds and the cash value of life insurance policies.

Consider a retired Miami homeowner whose only income is $1,400 a month in Social Security and whose only significant asset is a homestead. A credit card company can sue her and win a judgment, but it cannot garnish her benefits, seize her home, or reach her IRA. Filing Chapter 7 would cost her attorney's fees and a filing fee to discharge debts no creditor could ever collect. We tell that client not to file. If a creditor sues, we can often respond with a short letter documenting her exempt status, and collection efforts usually stop.

Your Debts May Be Too Old to Enforce

Florida's statute of limitations bars stale collection lawsuits. Under Fla. Stat. § 95.11(2)(b), an action on a written contract must be filed within five years. Claims on open accounts and oral agreements are barred after four years under § 95.11(3). The clock generally runs from the date of default, which for most consumer accounts is roughly 30 days after the last payment.

A worked example: a client last paid on a credit card in March 2019 and defaulted in April 2019. A collector who sues in June 2024 on a written cardholder agreement has missed the five-year deadline, and the suit can be dismissed on limitations grounds. Filing bankruptcy to discharge that debt would be paying to solve a problem the calendar already solved. One caution: a new payment or a written acknowledgment of the debt can restart the limitations period under Fla. Stat. § 95.04, so we tell clients in this position not to make token payments to collectors.

Your Debts Would Survive the Discharge

Bankruptcy does not erase everything. 11 U.S.C. § 523(a) excludes many common obligations from discharge, including most federal student loans (§ 523(a)(8)), income taxes assessed within the look-back periods of § 523(a)(1), domestic support obligations (§ 523(a)(5)), and debts incurred by fraud (§ 523(a)(2)). We keep a full breakdown on our page covering debts Chapter 7 does not discharge.

If 80 percent of your debt load is student loans and recent tax years, a Chapter 7 discharge wipes out the small remainder and leaves the core problem untouched. In that situation we usually recommend an income-driven repayment plan for the student loans and an IRS installment agreement or offer in compromise for the taxes. Bankruptcy can wait, and may never be needed.

You Have Filed Too Recently

The Bankruptcy Code limits how often you can receive a discharge:

• Under 11 U.S.C. § 727(a)(8), you cannot receive a Chapter 7 discharge if you received one in a case filed within the prior eight years.
• Under 11 U.S.C. § 1328(f)(1), you cannot receive a Chapter 13 discharge if you received a Chapter 7 discharge in a case filed within the prior four years.

Example: a client filed Chapter 7 in September 2018 and received a discharge. He cannot receive another Chapter 7 discharge in any case filed before September 2026. A Chapter 13 discharge became available in September 2022, so if he needs court protection now, a repayment plan may work. We cover that analysis on our page about when Chapter 13 is the right choice. If neither chapter is open to him and his assets are exempt, waiting is usually the better answer than filing a case with no discharge at the end of it.

You Would Lose More Than You Would Gain

Outside the homestead, Florida's exemptions for personal property are narrow. Article X, Section 4(a)(2) of the Florida Constitution exempts only $1,000 in personal property. Fla. Stat. § 222.25(1) adds $1,000 in vehicle equity, and § 222.25(4) provides a $4,000 wildcard, but only for debtors who do not claim the benefit of the homestead exemption.

Take a Miami homeowner with a paid-off car worth $14,000. Because she claims her homestead, the wildcard is unavailable. She can protect $1,000 of vehicle equity plus part of her $1,000 personal property exemption, leaving roughly $12,000 of nonexempt equity. A Chapter 7 trustee could sell the car, pay her the exempt portion, and distribute the rest to creditors. If her unsecured debt is $18,000, she would be trading a $14,000 car to escape $18,000 in debt. A negotiated settlement, often at 40 to 60 cents on the dollar over time, leaves her better off. Before any filing, we run this math using the same asset inventory described in our bankruptcy document collection checklist.

Your Income Fails the Means Test, and Chapter 13 Makes No Sense

High earners with primarily consumer debt face the means test under 11 U.S.C. § 707(b). If your household income exceeds Florida's median and the calculation shows meaningful disposable income, Chapter 7 is presumptively abusive and the practical option is a five-year Chapter 13 plan. If that plan would repay creditors 90 or 100 percent anyway, you are paying nearly the full debt plus attorney's fees and trustee commissions of up to 10 percent, all under five years of court supervision. Direct negotiation with creditors frequently produces the same or better result without a bankruptcy on your record.

What We Recommend Instead

When we advise against filing, we do not send clients away empty-handed. Depending on the facts, we may:

• Send exemption notices to creditors documenting judgment-proof status;
• Defend collection lawsuits in Miami-Dade County courts, raising limitations and standing defenses;
• Negotiate lump-sum or structured settlements, with written releases and attention to the tax treatment of forgiven debt under 26 U.S.C. § 108;
• Assert claims under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., and the Florida Consumer Collection Practices Act, Fla. Stat. § 559.72, when collectors cross the line;
• Set a timeline for filing later if circumstances change, so exemption planning and the timing rules work in your favor.

Bankruptcy remains the right answer for many people, and when it is, we handle the Miami bankruptcy filing from petition through discharge. The point is that the decision should follow the analysis, not precede it.

You can contact the Law Offices of Albert Goodwin by phone at 786-522-1411 or by email at [email protected].