Florida’s Homestead Exemption in Bankruptcy
Florida residents pondering whether they should file for bankruptcy protection need to consider how filing will affect their assets. In many states, consumers who file for Chapter 7 bankruptcy can end up losing their homes and other valuable assets, such as their cars. Fortunately, the situation is different in Florida, but you still must carefully analyze how bankruptcy will affect you.
Chapter 7 Bankruptcy and Your Assets
In the typical Chapter 7 bankruptcy, the trustee who oversees your bankruptcy is empowered to sell your assets and use the proceeds to pay off your unsecured creditors. Any debt left over gets discharged (wiped out) in the bankruptcy.
For example, you might have $100,000 in unsecured debt but own a share of a property worth $40,000. In this situation, the trustee can sell your share of the property and apply the $40,000 to your debt. The debt that remains ($60,000) gets discharged at the completion of your bankruptcy.
Florida’s Homestead Exemption
Each state is allowed to exempt property and keep the trustee from selling it, even if you file for Chapter 7 bankruptcy protection. Florida has created a specific exemption for people’s homes. In bankruptcy, you can exempt up to $145,000 for a single person or $290,000 for joint bankruptcy debtors. For example, if you are single and you own a home worth $140,000 in Florida, then you can exempt all of the home’s value. If the home is worth $200,000, then a single person can exempt $145,000.
However, if you have lived in your home for 40 consecutive months before filing for bankruptcy, then these dollar limits do not apply. Instead, you can exempt the entire value of your homestead. So if your home is worth $2 million, but you have lived in it for more than 40 consecutive months, you can protect the entire value in bankruptcy. Congress adopted the 40-month requirement to keep people from moving to Florida and immediately filing for bankruptcy to take advantage of the state’s generous homestead exemption.
Does Your Home Qualify?
According to Florida’s Constitution, homestead protection applies to a personal residence on a maximum one-half acre of land within city limits or 160 contiguous acres in any county. Florida’s courts have generously defined homesteads to include:
- Mobile homes
- Manufactured homes
However, the law has some important limitations. For example, you must be a Florida resident in order to qualify. Also, the home must be your primary residence. If you don’t live in the home, then you can’t claim the homestead exemption, so investment properties and second homes do not qualify.
Furthermore, you must own the home yourself and cannot own it in the name of a partnership, corporation, limited liability company, or irrevocable trust. If you own the home differently—say, in a revocable living trust—then you should consult with an attorney to analyze your situation.
Experienced Plantation Bankruptcy Attorneys Here to Help
Filing for bankruptcy is a difficult decision. Before filing, you should thoroughly consider how all of your property, including your home, will be affected. A bankruptcy lawyer at Nowack & Olson can answer your questions, so please do not hesitate to reach out today. For a free consultation, submit an online form or call 888-813-4737.