Florida Property and Bankruptcy Laws

Bankruptcy can be a complicated and difficult process, but it’s not meant to strip the debtor of everything he owns. That draconian result would defeat bankruptcy’s fundamental aim, the provision of a fresh start for the debtor who is overwhelmed by debt. At the same time, creditors have rights of their own, and bankruptcy doesn’t just wipe out debts and leave the debtor’s assets completely intact. Instead, it protects some of the debtor’s property by treating some property as “exempt.” If a property falls into that category, the debtor may well be able to retain ownership after filing. The statutory scheme, governed in Florida by state law, is rife with limitations and exceptions, but the basics are reasonably straightforward.

The most famous – and often most valuable – Florida exemption is the homestead exemption created by the Florida Constitution. It protects homesteads of up to half an acre within municipalities and up to 160 acres elsewhere, with no limit on the homestead’s value if it was purchased at least 40 months prior to filing. If the purchase was more recent, only $146,450 of equity is exempt.

Even with the homestead exemption, a mortgagee, like any secured party, can still rely on its security interest. If a foreclosure is in process, for example, bankruptcy stays further activity, but the stay may end when the creditor asks for leave to proceed. Debtors may also “reaffirm” a debt and keep secured property as long as they keep making payments.

Automobiles are exempt up to $1,000 of the debtor’s equity or $2,000 if vehicles are jointly owned by spouses, and there’s an equivalent exemption for miscellaneous personal property. Debtors who don’t claim a homestead receive an additional “wildcard” exemption for $4,000 of personal property.

Exemptions also cover the vast majority of retirement accounts, including IRAs, 401Ks, pensions and annuities, and Social Security and disability income. Health savings accounts, hurricane savings accounts and life insurance cash values are also exempt.

Subject to a handful of exceptions for specific properties acquired within 180 days of filing, property acquired after filing is completely outside the bankruptcy estate. While property owned at the time of filing is certainly at risk, exemptions and reaffirmations make it possible for almost every debtor to emerge from bankruptcy with some of what he owned before he filed.

Marina Title is Florida’s longtime title insurance and real estate closing service provider. We are an attorney-owned and operated law firm that can assist those looking to buy a home, even those who have dealt with bankruptcy in the past. We are ALTA-compliant and ready to help you become a homebuyer. Contact us today to speak with one of our team members at (305) 901-5628 or at info@marinatitle.com.