One of the key issues in filing bankruptcy is determining what constitutes “exempt” property. If you have resided in Florida for the two years before filing bankruptcy, you are allowed to keep exempt property without having to pay back your unsecured creditors the value of the exempt property. The following list of property is some of the exempt property in Florida. (Note: If you resided in another state for the two years before filing bankruptcy, our office will have to research the laws of that state before determining what exemptions apply to you).
Your homestead is exempt under Article X, Section 4 of the Florida Constitution. This protection is afforded homestead properties situated on one-half acre or less within a municipality and properties up to 160 acres outside a municipality. There is no dollar limitation. The homestead exemption applies to all Florida residents.
Florida residents can protect unlimited equity in your homestead provided you purchased the residence 40 months or more prior to filing bankruptcy. If you purchased your home within 40 moths of filing, you can exempt up to $146,450 of equity. Additionally, if you paid down the principal your mortgage or added an addition to your home within 40 months of filing, the amount of the money you put in your home or the amount spent for the addition made within 40 months of filing will not be exempt even if you purchased your home more than 40 months ago. (Keep in mind that the 40 month rule applies only to bankruptcy cases; therefore, our office might advise you not to file bankruptcy if you purchased a large home in cash in the last 40 months).
Other notable exemptions under Florida law:
Automobiles: You are allowed to exempt $1,000 of equity in an automobile. Spouses whose car is titled in both names may exempt $2,000 of value in the car.
Pensions: Florida gives you an unlimited exemption for most qualified retirement plans. IRAs are capped to approximately one million dollars per spouse.
Miscellaneous personal property: If you claim a homestead exemption, you can keep up to $1,000 of equity in your personal property, including furniture, clothes, cash, tools, etc. (If you are married and file jointly, you can keep up to $2,000 in equity). If you do not claim a homestead exemption, you can keep up to $5,000 ($10,000 married filing jointly) of personal property.
Nonexempt property is any property that is not claimed exempt. If you file bankruptcy, you have to pay your unsecured creditors back the value of your nonexempt property.
Your home is worth $2,000,000. Your mortgage is $80,000. You bought the property five years ago. You are not married. You own a car. It is worth $20,000. You owe $19,000 on the car. You want to keep the home and the car. Your furniture, checking accounts, and clothes are worth $2,500.00. You have $100,000 in your 401k. You have $100,000 in credit card debt. If you qualify for chapter 7 bankruptcy, you can keep your home and continue to pay the $80,000 mortgage. You can keep the car and continue to make the regular car payment. You are allowed to keep all the 401k because it has an unlimited exemption. Although your car is worth $20,000, you have only $1,000 of equity in it, which you are allowed to keep. You are allowed to keep $1,000 of the personal property. You can either give $1,500 of remaining personal property to the trustee or you can keep the personal property and pay the trustee $1,500. The trustee will use the $1,500 to pay your credit cards. The credit card companies will receive 1.5% of their balance. The rest of the debt will be wiped out in the bankruptcy.
Example #2: Same facts as above except you added an addition to your house last year. You paid $50,000 cash for the addition. You could still keep the house, but you would have to pay the trustee $50,000 plus the $1,500 for the personal property.