Insolvency Proceedings in Florida
An insolvency proceeding is a legal process to address a debtor’s inability to pay obligations. In Florida, these proceedings include federal bankruptcy (the primary mechanism) and state-law alternatives such as assignments for benefit of creditors.
Types of Proceedings
- Chapter 7 (Liquidation): Non-exempt assets sold to pay creditors; remaining debts discharged
- Chapter 11 (Reorganization): Business continues operating under a court-approved repayment plan
- Chapter 13 (Individual adjustment): Individual debtor follows a 3-5 year repayment plan
- Assignment for benefit of creditors (Section 727): State-law alternative; debtor assigns assets to a fiduciary for liquidation
Assignment for Benefit of Creditors
Florida’s ABC process offers advantages for closing businesses:
- Faster resolution (6-12 months vs. 1-3 years for bankruptcy)
- Lower administrative costs
- Greater flexibility in asset disposition
- No creditor approval requirement
- Supervised by circuit court
Real Property Treatment
- Homestead: Protected under Article X, Section 4, Florida Constitution (unlimited acreage unincorporated; half acre in municipalities)
- Non-homestead: Available to satisfy creditor claims
- Liens: Mortgages and judgment liens generally survive unless specifically addressed
Related Terms
- Insolvency — Financial condition
- Bankruptcy — Federal proceeding
- Homestead Exemption — Florida property protection
- Lien — Creditor security interest
Barnes Walker Creditor and Debtor Services
Barnes Walker’s attorneys represent creditors and debtors in insolvency proceedings including ABCs and bankruptcy-related matters in Southwest Florida. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC