What are the Florida bankruptcy exemptions, and why are they important in a Chapter 7 bankruptcy?
You might have reached a point where you are finding it hard to pay your bills and credit card debts, and you have decided to file for Florida bankruptcy. It’s normal that there are some assets, like your home and motor vehicle, which you would like to keep, and are wondering how to accomplish that. Like most states in the country, Florida also has a set of bankruptcy exemptions filers can use to protect their property, such as a car, home, or retirement account when filing Chapter 7 bankruptcy or Chapter 13 bankruptcy.
Florida’s bankruptcy laws have many exemptions. A bankruptcy exemption simply means that filers can keep the asset, such as health savings accounts, in question. The property you’re allowed to keep in a Chapter 7 bankruptcy in Florida is called your "exempt" property. In a Chapter 7 bankruptcy, you wipe out your unsecured debts and get a fresh start. You don’t have to pay debts, like credit card debt and medical bills, as they are wiped out when the discharge is entered.↑ Back to top
Does Florida allow the use of federal bankruptcy exemptions?
If you have done some research on bankruptcy cases or exempt property, you will probably have come across the terms federal bankruptcy exemptions and state exemptions. Although the federal Bankruptcy Code has a list of bankruptcy exemptions, these exemptions aren’t available in Florida. In Florida, you are not permitted to use the federal bankruptcy exemptions. Florida residents have to use the state exemptions. Also, you can use the federal nonbankruptcy exemptions contained in the federal law if you have any assets covered by them.
Note that if you haven’t been a permanent Florida resident for the 2-year period immediately before your Chapter 7 bankruptcy case is filed, you’re required to look at the exemption laws of the state where you lived 2 to 2½ years ago and may have to use federal exemptions.↑ Back to top
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Florida Bankruptcy Exemptions
In almost every case, filing bankruptcy doesn’t leave an individual penniless and without any personal belongings. You are allowed to keep some property to help you make a fresh start once your bankruptcy is complete.
You can prevent your assets, like a car and bank account, from being sold by your Chapter 7 trustee by using Florida bankruptcy exemptions. You may also lower the amount you have to pay to your unsecured creditors in a Chapter 13 bankruptcy repayment plan by exempting the equity in the property. However, keep in mind that you have to “claim” these exemptions in your Florida bankruptcy filing; otherwise, they won’t apply.↑ Back to top
Real Property - The Florida Homestead Exemption
Florida is well known for its generous homestead exemption. This exemption allows you to protect an unlimited amount of value in your home or any other property covered by the Florida homestead exemption. So, if you have equity in your home (meaning your home is worth more than the amount you owe on it), Florida’s homestead exemption allows you to keep your home if you file for Chapter 7 bankruptcy in the state. Note that the Florida Homestead Exemption Statute is the main legislation that determines eligibility for retaining specific assets, like your home.
The only conditions are that the property can’t be larger than a half-acre if it’s in a municipality or 160 acres if it’s elsewhere. And you must have owned that property for 1,215 days before your bankruptcy filing in Florida. Only “natural persons” can use the bankruptcy homestead protection in Florida. This means that properties that are titled in the name of corporations, partnerships, LLCs, or irrevocable trusts are not protected under the law.
Wild Card Exemption
People who don’t claim or get the benefits of a Florida homestead exemption have a great advantage in Florida. You can claim a personal property exemption of up to $4,000 if you are an individual filer. The exemption is $8,000 for joint filers pursuant to Florida Statute 222.25(4). This exemption is known as the “bankruptcy wildcard exemption,” as filers have the discretion to choose the property that they want to exempt. So, Florida law allows you to claim up to $4,000 of your other personal property as exempt, provided you didn’t use the homestead exemption.↑ Back to top
Personal Property Exemptions
This category of bankruptcy exemption covers your car and non-retirement bank accounts. It also covers most of your other personal possessions, other than your house. Some personal property exemptions in the state may be for any combination of assets up to an aggregate amount. On the other hand, some exemptions apply only to specific items, like jewelry. You can protect any personal property worth up to $1,000 in total, or up to $4,000 if you don’t claim the homestead exemption.
Some of the Florida bankruptcy exemptions filers may use to protect their property in a Chapter 7 bankruptcy or Chapter 13 case include the following.
If you are having financial troubles and have filed for bankruptcy in Florida, it is likely that you will need access to your car. Florida has a motor vehicle exemption, and it allows you to exempt up to $1,000 in equity in your car. This amount is more, usually $ 2,000, if you’re married and file for bankruptcy jointly. Note that if you have over $1,000 in equity in your car, you might be able to cover the additional amount with the wildcard available for personal property as long as you don’t claim the homestead exemption.
Currently, courts in Florida use a certain standard for motor vehicle valuation, called the Kelley Blue Book value. If you’re thinking about selling your car before you file bankruptcy, keep in mind that this value will be used to make sure you sold the vehicle for a fair amount, and didn’t just transfer it out of your name to try and protect it from your creditors. The Kelley Blue Book value is often higher than dealer trade in.↑ Back to top
Other Personal Property
You can protect the following personal property.
Personal property is exempt up to $1,000. You can protect up to $4,000 if you have not used the homestead exemption. Personal property can include various items, such as furniture, electronics, and art, etc. (Article 10, Section 4, Fl. Constitution).
You can protect education savings, hurricane savings, and health savings under Fla. Stat. Ann. § 222.22
You can protect prescribed health aids under Fla. Stat. Ann. § 222.25
Tax refunds and credits are exempt under Fla. Stat. Ann. § 222.25(3)
You can protect prepaid medical savings account and your health saving account deposits under Fla. Stat. Ann. § 222.22(2)
Funeral costs are exempt as per the Preneed Funeral Contract Consumer Protection Trust Fund in Florida under Fla. Stat. Ann. § 497.456
You can protect particular partnership property under Fla. Stat. Ann. §§ 620.153, 620.8307
Florida exemptions also protect a variety of money benefits, including retirement benefits. You can benefit from this exemption if you have pensions or retirement funds, such as IRAs, ERISA qualified pensions and retirement plans, 403(b)s, 401(k)s, and public employee retirement benefits. Also, note that pensions for firefighters and municipal police officers, county and state officer retirement benefits, as well as teacher retirement benefits, are also exempt in the state. The rule of thumb is that any pension that is covered under federal tax exemptions is considered fully exempt under the law.
When you are in doubt, you should ask your plan administrator or HR office whether or not your plan is an “ERISA” plan. And if it is, then the retirement plan is protected. If you have any pensions or retirement benefits, talk with a competent bankruptcy attorney in Florida on what you can do to protect these assets.
Section 121.131 covers state officers and employees
Section 122.15 covers county officers and employees
Section 175.241 covers firefighters
Section 185.25 covers police officers
Section 222.21 covers ERISA - qualified benefits, and Roth IRAs and IRAs
Section 238.15 covers teachers
If you are the head of the household, Florida laws also protect your wages. The amount of exemption is up to $750 a week, or 75% of your paycheck or 30 times the federal minimum wage, whichever is higher. Keep in mind that this exemption applies to wages that are paid and unpaid, and includes wages that have been transferred to your bank account anytime during the last 6 months.
Public Benefit Exemptions
Bankruptcy exemptions in Florida provide protections for a variety of public benefits, such as social security, veterans’ benefits, reemployment assistance, unemployment compensation benefits, workers’ compensation and crime victims’ benefits.
Death benefits that are payable to a specific beneficiary are exempt under Section 222.13, and annuity contract proceeds (not including lottery winnings) and life insurance are exempt under Section 222.14. Under Section 222.18 disability and/or illness benefits are exempt. And fraternal benefit society benefits are exempt under Section 632.619.
Alimony and Child Support
Since certain family law orders are deemed important in the country as a matter of public policy, child support and alimony are considered exempt in Florida to the extent that these payments are reasonably necessary for the ongoing support of the bankruptcy filer and any of their dependents.
Personal Injury and Lawsuit Exemptions
Damages or compensation (money) for a worker’s injuries or death that happened while working in a dangerous or hazardous occupation are exempt under Fla. Stat. Ann. § 769.05. However, any other monetary amount that you receive from a lawsuit or any pending legal claim will belong to the bankruptcy estate. In order to protect the money, you will have to use another bankruptcy exemption, like the wildcard exemption.
Also, keep in mind that if you have not resolved the lawsuit when you file for Florida bankruptcy, your bankruptcy trustee has the right to decide whether or not to retain a bankruptcy attorney to proceed with the case in your stead. Your trustee will then decide if it’s better to settle the legal case or proceed to trial.↑ Back to top
Filing Chapter 7 Bankruptcy?
Non-exempt property or assets you have an ownership interest in as of the date your bankruptcy petition is filed will be included in your Florida bankruptcy estate, and the Chapter 7 trustee may take and dispose of all non-exempt property in order to distribute the proceeds to your unsecured creditors. Note that in some cases, you will get the opportunity to keep your non-exempt assets under a sort of “buy back” program, if you agree to it with your Trustee.
We have discussed some of the most common bankruptcy exemptions in Florida. There may be other exemptions that might apply to your situation. You will have to ensure that you declare all of the bankruptcy exemptions you are eligible for by reviewing the Florida Constitution, Florida Statutes, and the Bankruptcy Code. This can get extremely complex; so, it is certainly beneficial to speak to a Florida attorney to ensure you take full advantage of all the allowed exemptions in the state. The attorney will tell you how exemptions can differ under Chapter 7 and Chapter 13.
If you are not able to afford a bankruptcy attorney to help you, and you don’t have any valuable property that is not protected by an exemption, take this simple and short quiz in order to find out if Upsolve can help you.↑ Back to top