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Bankruptcy and the homestead exemption

Florida residents who are filing for bankruptcy may be able to keep their homes under their state’s homestead laws. In fact, of all the states, Florida is one of the most protective in helping people keep their homes. Even without filing bankruptcy, registering some property as “homestead” usually prevents creditors from taking it.

While prior to bankruptcy the amount that can be registered is limited, in bankruptcy, that is usually not the case except for some acreage. Homestead protection allows for the entire value of the home plus half an acre in an urban area and a full acre in a rural one to be registered.

One exception to this protection is federal income tax liens. Other creditors who can collect by forcing a homestead sale are those to whom it was mortgaged, professionals such as builders who are owed for their work on the homestead, creditors who placed a lien prior to the property’s registration as a homestead, and the state or local governments who are owed property taxes.

Fear of losing one’s home and other assets is one reason some people hesitate to file for bankruptcy. Others may think that their income is too high to file. However, certain assets along with the home may be exempt, and for people with regular sources of income, Chapter 13 bankruptcy might be an option. This allows people to get on a manageable payment plan, and they may be able to keep other assets. Many people struggle with filing for bankruptcy because they feel ashamed or worry that it will permanently damage their credit, but filing for bankruptcy can be a financially responsible move.

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