Bankruptcy allows an individual or business overwhelmed by debt to get a fresh start by discharging most debt or allowing a manageable plan and time frame for repayment.
The cost of bankruptcy is that some of your assets may be taken or liquidated to pay your creditors. If bankruptcy meant losing everything, it would be nearly impossible to move forward after filing. The bankruptcy code therefore allows certain property exemptions for basic assets and possessions that cannot be used to pay creditors.
The federal bankruptcy code at one time did not define exemptions, and exemptions depended entirely on state law. Currently, federal law defines exemptions, but allows states to opt out and create their own statutes concerning exemptions. Florida is one state that does so. States are also permitted to decide whether debtors may choose between the federal or state bankruptcy scheme. Florida debtors must use Florida’s exemptions, which are quite favorable.
In order to qualify for the use of Florida’s exemptions, you must live in Florida for a minimum of 730 days prior to filing for bankruptcy.
Florida’s exemption for your home, called a homestead exemption, is one of the most generous in the nation. The law puts no limit on the exemption allowed for your home. Prior to the Bankruptcy Abuse and Prevention Act of 2005, wealthier debtors would often buy an expensive home in a state like Florida just prior to filing for bankruptcy, thereby shielding large amounts of otherwise non-exempt cash and other assets from creditors. The Act curbs this practice by requiring debtors to have purchased the home more than 1215 days prior to filing; otherwise, the exemption is limited to $146,450.
Up to $1000 worth of personal property, such as furniture and electronics, may be exempted. Alternatively, an exemption of $4000 for personal property is allowed if the debtor does not take a homestead exemption. A separate exemption of up to $1000 is allowed for a motor vehicle.
For heads of household, up to six months worth of wages deposited in a bank account at up to $750 per week is exempt. The Florida state legislature raised this limit from $500 per week in October, 2010.
Many types of savings are exempt, including: 401(k) and 403(b) plans; IRAs and Roth IRAs; educational savings accounts and Florida Prepaid tuition payments; health savings accounts; and hurricane savings accounts. Limits apply to some of these exemptions, but they are in most cases quite generous.
Life insurance policies are exempt up to their cash surrender value, as are veterans’ benefits and social security benefits.
Pensions, such as those payable under the Florida Retirement System, police and firefighter pensions, and teachers’ retirement benefits, are exempt.
These are merely the most commonly-claimed exemptions. Florida’s bankruptcy statutes contains still more exemptions that apply in special cases. A qualified Florida bankruptcy attorney will be able to assist you in finding and claiming every allowable exemption under the law.
O. Reginald (“Reggie”) Osenton is the Owner and President of Osenton Law Offices, P.A. If you need a Brandon bankruptcy lawyer, Tampa bankruptcy lawyer, or Tampa bankruptcy attorney, call 813.654.5777 or visit Brandonlawoffice.com.