When a Florida resident considers filing a petition for discharge of debts in U.S. Bankruptcy Court, one of their first questions is whether doing so will mean they will lose their home. A related question is whether a bankruptcy filing will mean losing the family car. The answers to these questions have straightforward answers under Florida statutes.
Before diving into the statutory provisions regarding exempt and non-exempt property, any potential bankruptcy filer should be aware that federal law also provides a separate list of property that is exempt from forfeiture under bankruptcy.
Because the exemptions are more generous in Florida than under the federal list, this post will concentrate on those exemptions.
The homestead is usually safe
Florida law offers a very generous exemption from creditors for the family home. To claim this exemption, the debtor must have owned a home and used it as his or her personal residence in Florida for two years before filing the bankruptcy petition.
Under Florida law, a debtor is allowed to declare 100% of the equity in the home as exempt from creditors. This generous exemption means that most people who file bankruptcy have a good chance of keeping their home.
However, a debtor must continue to repay the mortgage loan that was used to purchase the house. If continuing payments is not feasible, a debtor may be able to work out a repayment plan with the lender.
The wage exemption
All wages earned by the debtor (assuming that the debtor is in fact the head of the family) are fully exempt up to $750 per week. Family members may declare up to 75% of their wages (or 30 times the federal minimum wage, whichever is greater) as exempt from claims of creditors.
Personal Property Exemptions
Florida offers several personal property exemptions:
- Personal property up to $1,000 (This limit increases to $4,000 if the debtor does not use the homestead exemption)
- Health savings, educations savings and hurricane savings
- Tax credits and refunds
- Prescribed home health aids
- Funeral expenses
- Certain property owned by a business partnership
The exemption for a personal automobile is limited to $1,000. This relatively low limit forces most debtors to attempt to work out a repayment plan with the bankruptcy trustee.
Most pension plans and retirement funds are exempt, including ERISA-qualified retirement benefits, public employee retirement benefits, including firefighter and municipal police pensions
Various life insurance benefits are exempt, including the following:
- Benefits of a policy payable to a specified beneficiary
- Disability income benefits
- Cash surrender value of a life insurance policy
- Proceeds of an annuity, except an annuity set up for lottery winners
Most public benefits are exempt, including Social Security benefits, Veterans’ benefits, workers’ compensation and unemployment benefits.
Alimony and child support
Alimony and child support received by the debtor are exempt if the debtor can establish that the payments are reasonably necessary for the debtor’s support.
Choosing and using exemptions offered by the State of Florida can be very complex, especially when the debtor may want to consider using the federal exemptions. Consulting an experienced bankruptcy attorney for help making these decisions would be a wise choice.