Personal bankruptcy is a tool for people to regroup and get back on track financially after they have been mired in debt. Wipe the slate clean and start again. But how do you do that without getting wiped out, without having your property seized to compensate creditors for their claims?
Since the intent of the U.S. Bankruptcy Code is for people to resume a functional, financial posture as quickly as possible, federal bankruptcy exemptions, known as “exempt property” are built into the process. By claiming these exemptions, you can protect most of your day-to-day assets. However, Florida does not allow debtors to use the federal exemptions.
Bankruptcy exemptions in Florida
If you have lived in the state for two years (or 730 days) prior to filing, you’ll use Florida’s state exemptions, which are, in fact, more favorable than the federal. In particular, the homestead exemption is very generous.
Unlike many states, Florida’s homestead exemption permits you to exempt the equity in your home. No matter how high it is, you’ll not be forced to sell, although there are stipulations:
- You must have owned for 1,215 days (about 3.5 years) prior to filing.
- If the property is in the city, it cannot exceed ½ acre. If it’s outside of town, it cannot exceed 160 acres.
Some people, however, cannot avail themselves of the homestead exemption. As such, they can use in its place the $4,000 wildcard. This wildcard exemption can be stacked on top of another exemption if the numbers don’t otherwise work out in your favor. Or it can be applied to personal property you want to hang onto that’s not otherwise protected by specific exemptions.
The wildcard builds flexibility into the process, allowing for creative responses, more ways of getting around tight corners. There are even some cases where it makes more sense to surrender the home and take the wildcard in its place. The net outcome proves more favorable.