What Will Happen to My Property in Bankruptcy? A Closer Look at Florida Property Exemptions

If you are debating filing bankruptcy you probably have concerns about what will happen to your assets. This blog post will explore the most common exemptions our firm utilizes to protect our client’s assets. While I am sure many people reading this have worries, it is important to understand that in most cases no property changes hands. The following list may not cover everything. If you have a specific issue or question, I encourage you to reach out to our firm and schedule a FREE Consultation with one of our experienced bankruptcy attorneys.

While bankruptcy law is federal, state exemptions are most commonly used to protect assets in both Chapter 7 and Chapter 13 bankruptcy cases. To claim the Florida exemptions, one must have resided in Florida for the last 2 years prior to filing their bankruptcy petition.

Note:  If you have not lived in Florida for the last two years, it simply means you must use a different set of state or federal exemptions. If this is your situation, make sure your bankruptcy attorney knows when you moved to Florida and he/she will be able to discuss the advantages and disadvantages of the exemptions that apply in your particular case.

Florida Exemptions:

Homestead (Fla. Stat. Ann. § 222.01-02):  Let us start the with the largest asset most people have and the best news for Floridians.  Florida has one of the most generous homestead exemptions in the United States.  An individual or couple filing for bankruptcy can exempt an unlimited amount of equity in their home so long as they have owned the property for at least 1,215 days prior to filing their case.  The property cannot be larger than a half-acre within the city limits or 160 acres outside of the city limits.

Note: If you have not owned your home 1,215 days, the exemption still applies up to a lofty $170,350.00 in equity. This is almost always enough to exempt the home, especially considering most newly purchased homes have mortgages that eat up much of a home’s equity.

  • Current on Mortgage Payments: Most people who are current on their mortgage payments reaffirm their home in the bankruptcy. This allows them to continue to make payments on their house and use those on-time payments to help re-establish credit after the bankruptcy discharge.
  • Behind on Mortgage Payments: If behind on mortgage payments you may need to file a Chapter 13 bankruptcy to save the home, provided you and/or your spouse has income.   A Chapter 13 plan that has been approved by the court, forces the mortgage company to allow you the opportunity to catch up the missed payments and bring the account current over the life of the plan. For more on Chapter 13’s, see our last blog post: “Saving Your Home by Filing a Chapter 13 Bankruptcy, The Ace Up Your Sleeve”. 

Motor Vehicle (Fla. Stat. Ann. § 222.25(1)):  The motor vehicle exemption in Florida is not as kind to debtors as the homestead exemption. The exemption allows filers to claim up to $1,000.00 in equity per person filing. So… $2,000.00 for a married couple.  This may not seem like much of an exemption, but often is more than enough for most filers.

  • New Vehicles: Most newly purchased vehicles have little or no equity that needs protecting. This is because most vehicles are financed and have an auto loan that exceeds the current value of the vehicle. Most vehicles depreciate 20-30% as soon as they are driven off the lot. Vehicles continue to depreciate with every year of ownership.
  • Older Vehicles:  Older vehicles may not be worth much after taking into account their age, miles, condition, and previous accidents or wrecks.

Other Ways to Protect Car Equity:

“Wildcard Exemption” (Fla. Stat. Ann. § 222.25(4)):  In Florida, if you do not claim the benefit of the homestead exemption you are entitled to claim an additional $4,000.00 for an individual and $8,000.00 for a married couple filing jointly in personal property exemptions. This can be used on almost anything except land and can always be applied to excess car equity.

Note: The Wildcard exemption is only available in Chapter 7 cases. 

Tenancy by the Entirety (11 U.S.C. § 522(b)(3)(B)):  This exemption may apply to joint marital property where only one spouse is filing bankruptcy. Certain conditions must be met to use this exemption, and these may be outside the scope of this post, but rest assured a well-versed bankruptcy attorney will apply any exemptions that may be pertinent and helpful to protecting your assets.

Personal Property (Fla. Const. art. X, § 4(a)(2)):  In Florida, much like the vehicle exemption, an individual can exempt up to $1,000.00 in personal property. A couple filing a joint case can exempt up to $2,000.00 in personal property. Personal property includes many things, such as furniture, art, clothes, electronics, jewelry, bank account balances and much more. You are responsible for listing and valuing your own property in bankruptcy. Our firm makes this easy by providing a check list of everything people typically own or have in their home.

Note: We ask that our clients put a “replacement value” on their items (what would you get if you were to buy/sell that item on the open market such as with a site like craigslist or at the pawn shop). Considering the items age and condition. Most of the time property values for used items are much lower than the original purchase price. I get asked all the time, will the Trustee come out to my house? I tell clients that although the Trustee does have that right, it rarely happens, and you greatly reduce your risk of having this happen to you if you list all your assets.  

Other Important Exemptions:

Retirement (Fla. Stat. Ann. § 222.21(2)):  ~Retirement, profit-sharing, stock bonus plans, annuities qualified under IRS 1986-100%. The court allows you to exempt 100% of your valid retirement accounts in bankruptcy.

Term Life Insurance (Fla. Stat. Ann. § 222.13):  ~Life Insurance proceeds-100%. The court lets you exempt 100% of Term Life Policies.

Whole Life Insurance (Fla. Stat. Ann. § 222.14):  ~Life Insurance policies - cash surrender value or proceeds of annuity contracts-100%. The court lets you exempt 100% of whole life policies cash surrender values, where the policy is on the life of one of the individuals filing for bankruptcy.

Social Security Benefits (Fla. Stat. Ann. § 222.201):  ~Social Security, Public Assistance Benefits. The court allows you to exempt 100% of Social Security Benefits and backpay.

Workers Comp Claims (Fla. Stat. Ann. § 440.22):  The court also lets you keep 100% of payments/settlements for workers comp claims. But not personal injury claims. If unsure, please call our office to discuss.

VA Benefits (Fla. Stat. Ann. §§ 222.201, 744.626):  The court lets you keep 100% of VA Benefits as well.

Note: It is important to try not to commingle proceeds from these exempt sources with other non-exempt sources such as wage income, or rental income etc... This could cause these otherwise exempt funds to lose their exempt status.

As you can see, there are many exemptions in place to provide protection for your assets when you file for bankruptcy. The exemptions discussed above are not an exhaustive list of all exemptions available. If you have a question about a particular asset, please reach out to your attorney to discuss its treatment in bankruptcy. There may be other ways to protect assets that do not fall under a normal exemption such as by filing a Chapter 13 and paying some money back to creditors. The Sliva Law Firm would be happy to talk with anyone who has questions about their particular situation. We offer a FREE consultation and can be reached at (850) 438-6603. Or through the link on our website.