As in many states, Florida employs a list of exemptions that can protect your property when you file for bankruptcy. Which bankruptcy chapter you file under, either Chapter 7 or 13, will determine what happens to any nonexempt property you hold.
- Under Chapter 7 bankruptcy, a bankruptcy trustee will sell all nonexempt property and distribute the profits to creditors.
- Under Chapter 13 bankruptcy, while you get to keep all of your property, you will still need to pay the value of equity on nonexempt property in your repayment plan.
Florida Does Not Recognize Federal Bankruptcy Exemptions
Within the bankruptcy code you’ll find a series of federal bankruptcy exemptions. Your state’s bankruptcy laws will determine how those exemptions are used. The state of Florida does not recognize these federal bankruptcy exemptions. Instead, you must use Florida’s bankruptcy exemptions.
Here’s the good news. If you own your home, then Florida’s bankruptcy exemptions are very favorable. So long as your residential property meets Florida’s guidelines, you’ll be able to exempt all of the equity. In addition, Florida bankruptcy exemptions offer unlimited annuities exemptions, as well as exemptions for a life insurance policy’s cash surrender value.
Residency Requirements for Florida Bankruptcy Exemptions
In order to use Florida’s bankruptcy exemptions you must have lived within the state for at least 730 days before the date that you file your bankruptcy petition. If you have not lived in a single state during that two year period, then the state exemptions available will depend on which state you lived in for the majority of a 6 month period before two years prior. For example, let’s say that you lived in California between January 1, 2012 to January 1, 2014, and then you permanently moved to Florida. You then file for bankruptcy in Florida on January 1, 2015. In this case, you would need to use California’s bankruptcy exemptions instead of Florida’s.
Florida Bankruptcy Exemptions and Chapter 7 Bankruptcy
Because Florida bankruptcy exemption laws protect the equity of your residence for up to an unlimited amount, you will still get to keep your home under Chapter 7 bankruptcy no matter how much equity it has. In comparison, many states do not offer any exemptions that cover nearly as much as Florida.
However, you should understand that filing for Chapter 7 will not help you if you have fallen behind on your house payments. While Chapter 7 can temporarily halt foreclosure, you will still need to keep current with your payments to permanently save your home.
The Homestead Exemption with Chapter 13 Bankruptcy
During Chapter 13 bankruptcy you get to keep all of your property so long as you repay your creditors through a three to five year repayment plan. Your unsecured creditors must get as much as they would have gotten had you filed for Chapter 7 bankruptcy. How much your creditors would have received is dictated by the homestead exemption.
In the state of Florida, your creditors would not have gotten any equity if you filed for Chapter 7 because all home equity is exempt. Because of this, your monthly payment is not affected by your home’s equity, even if you own your home free and clear.
Florida’s Wildcard Exemption
If you do not own your home, or you do not need the Homestead Exemption, then you can protect up to $4,000 through Florida’s Wildcard Exemption. This is particularly useful if you own a lot of items that do not fit within certain categories, or if your property’s value is over the amount protected by the court.
Further Help with Florida Bankruptcy Exemptions
If you’re a resident of Florida and file your bankruptcy, you should understand Florida bankruptcy exemptions. To get the help you need, consider contacting the seasoned legal team at Ryan J. Really, Attorney at Law, PLLC today.