Florida Bankruptcy Exemptions

As bankruptcy lawyers, prospective clients are always asking us the following questions:

• Can I keep my home?
  
• Will they take my car?
• What's going to happen to my retirement account?

Unfortunately, there are no simple answers to these questions.  Everything depends on the law of exemptions from the claims of creditors or the bankruptcy trustee.  However, the following is a list of several important exemptions for Florida residents.  To take advantage of these exemptions, a person must have resided in Florida for at least two years.  If not, the person will have to use the exemptions available in their prior state.  In some situations, however, a person will be better off using the exemptions from their prior state, except when it comes to Florida's relatively generous homestead exemption.

• Florida homestead. Under Florida law, unlimited homestead protection if under one-half of an acre in a municipality, otherwise 160 acres. No value limit. But if bankruptcy is filed, property must be owned for 1215 days, or only $125,000 exemption.(Probably a total of $250,000 for husband and wife). If prior homestead sold and proceeds used to buy a new homestead, exemption continues. But remember, even the $125,000 is not protected if debtor had not been a Florida resident for two years. This change was designed to prevent people from moving from out of state to take advantage of Florida's homestead protection. This exemption adjusts due to inflation. As of April 1, 2007, the amount increased to $136,875.00.  
• Homestead protection applies to mobile homes that remain on the real estate lot.
• Tenancy by the entireties. Assume only the husband has debts. If property is owned by husband and wife, the property cannot be seized by creditors. Even a million dollar business property would be exempt. (But if a car is titled as husband or wife, this is not the same as husband and wife).
• A qualified retirement account, such as a 401(k), IRA, Thrift Savings Plan, or pension.
• $1,000 in personal property, $2,000 for husband and wife (so $5,000 in a savings account could not be all exempt).
• $1,000 in equity in a motor vehicle; husband and wife, $1,000 per vehicle up to 2 vehicles
• A new exemption allows an additional $4,000 personal property exemption if the debtor does not claim a homestead exemption.
• Wages of head of household (primary wage-earner).
• Bank account consisting of the deposits from the wages of the head of household
• Florida Prepaid Tuition Fund and a portion of 529 Plans.
• Earned income credit portion of tax refund(tax refunds can be taken by the chapter 7 trustee).
• Social Security or disability income (lump sum award received for social security disability might not be entirely exempt).
• Worker's compensation award.
• Right to receive child support or alimony necessary for support.
• Life insurance cash value (not the death benefit)
• Annuities.

It is important to remember that the existence of exemptions does not mean that you can simply transfer assets to make them exempt.  Such exemptions can be rejected if it is determined that you fraudulently transferred the asset to make it exempt.  Accordingly, exemptions will be reviewed on a case by case basis.