Bankruptcy is one of the most stressful events that a married couple can go through. Whether it is for a personal bankruptcy filing or if a spouse’s business has recently gone under during this difficult economy, it is important to know what a court-appointed bankruptcy trustee can and cannot claim of your spouse’s assets if you reside in Florida.
What is the residency requirement to claim creditor exemptions in Florida?
Because Florida has favorable exemption laws, many people assume that they can take advantage of them by moving to the state if they decide to file for bankruptcy. Although the state allows unlimited homestead exemptions from judgement creditors regardless of how long they have lived in Florida, for bankruptcy cases there is a residency requirement of two years in order to qualify for them.
How is my spouse protected if I file for bankruptcy?
It is important to know how federal bankruptcy law protects the debtor spouse’s assets during a bankruptcy filing, whether for personal or business bankruptcy:
- If the married couple files a joint federal return, the non-debtor spouse is entitled to keep half of the total refund, even if he/she did not contribute to the household income for that year. This is true even if they gave part of their income to help the debtor spouse.
- Assets such as inheritance, cash or property owned by the non-debtor spouse before marriage cannot be touched.
It helps to also note that the homestead exemption for residents who have lived in Florida for a minimum of 40 months protects the household’s main residence of unlimited value from creditors. Even if they have not met this residency requirement, federal law caps the exemption at a still generous $160,375.
How can we avoid bankruptcy pitfalls?
If you live in the Miami area, the first step to preparing for bankruptcy is finding experienced bankruptcy representation to help guide you through the process. Sometimes people get in over their heads when an aggressive bankruptcy trustee tries to seize assets. Having a bankruptcy plan is crucial, as is knowing your rights and those of your spouse.