In today’s turbulent economic times, many Florida families find themselves struggling to pay their bills. And even though bankruptcy may be an ideal choice for many of these families, they fail to explore the option for a variety of reasons – reasons such as the fear that they will lose everything in bankruptcy.
One important thing for Florida families to realize is that bankruptcy is not a punishment, but a way to obtain a fresh financial start. In fact, many families that file a Chapter 7 bankruptcy in Florida will actually be able to keep many of their possessions, including their home.
Homestead Exemption in Florida
When a debtor files for bankruptcy, there are many assets that are considered not part of the bankruptcy estate and thus protected from creditors. These protections are known as bankruptcy exemptions.
The federal bankruptcy code does delineate the various bankruptcy exemptions available to debtors, however, the federal code expressly permits each individual state the option to opt-out of these exemptions and create their own – which Florida has elected to do. Specifically, the Florida opt-out statute states, “[R]esidents of this state shall not be entitled to the federal exemptions provided in…the Bankruptcy Code.”
Consequently, when a debtor files for bankruptcy in Florida the exemption of their residence is determined under Florida law, which happens to be considerably more favorable for debtors than the federal counterpart.
Florida is one of the few remaining states that has no dollar limit to the amount available under their homestead exemption – thus protecting unlimited market value or equity in the residence. The one major limitation for the homestead exemption under Florida law is the land size of the homestead: one-half acre if the property is located within a municipality and 160 acres if located outside a municipality.
It is important to note, however, that Congress did pass a law limiting the uncapped homestead exemption in situations in which the residence was purchased within 40 months (1215 days) of the bankruptcy filing. In these situations, a Florida homeowner filing for bankruptcy can only exempt equity in the home up to $146,450.
As illustrated by Florida’s homestead exemption, filing for bankruptcy can be a complex process. There are numerous other exemptions available in Florida – with several different requirements for each that determines eligibility. If you are struggling with debt and are considering filing for bankruptcy, contact an experienced bankruptcy attorney to assist in navigating the bankruptcy laws and determining what the best options are available to you.
