If you are contemplating becoming one of the estimated 115,000 people who will file for bankruptcy in Florida this year, you probably have many questions and more than a few concerns about the road ahead for yourself and your family.
You may fear losing the house in which you live; the car you need to get to work and back; the IRA, 401K, pension plan or other retirement account you have worked so hard to fund or cherished family heirlooms that will never be replaceable. You may be afraid of life after bankruptcy: will you ever be able to buy a home or car again, will you ever be able to repair your credit and will all your friends and neighbors find out?
Relax. Take a deep breath. Almost everyone who’s considered bankruptcy has agonized over these same fears.
Fortunately many of these questions related to bankruptcy can quickly be dispelled upon discussing your financial situation with a bankruptcy attorney. Whether you’re considering a Chapter 7 or a Chapter 13 filing, requesting protection and relief from debt through the bankruptcy court may be one of the smartest decisions you will make regarding your finances.
Yes, there is life after bankruptcy and no, you will not lose everything. It’s entirely possible that the only thing you’ll lose in your bankruptcy filing is debt.
Federal and State Bankruptcy Laws Governing Exemptions
One of the biggest fears related to bankruptcy revolves around what will be lost. But, because of something called an “exemption,” certain property can be excluded from the bankruptcy estate. In other words, you will not have to give it up in order to receive a discharge of debt through the bankruptcy process. The type and amount of allowed “exemptions” or “exempt property” can vary by state.
While the United States Code is the central authority on bankruptcy rules and procedure throughout the country, each state can create its own exemption system and determine what types of property can be exempted from bankruptcy and to what extent. People filing for bankruptcy in Florida are at an advantage because Florida law is offers greater protection of more assets than many other states.
Qualifying for Florida Exemptions
Whether a filer is eligible to claim the protections offered by Florida’s exemption system depends on whether he or she qualifies as a permanent resident at the time of filing. Permanent residency, for the purposes of bankruptcy, does not simply mean that the filer has an address in Florida. He or she must have been domiciled in Florida for the last two years (730 days). If not, the filer will likely not be allowed to take advantage of the Florida exemption system and will have to use that of his or her prior state of residence.
The Homestead Exemption
The homestead exemption-set forth in Article 10 § 4 of the Constitution of the State of Florida-protects the home of the person filing for bankruptcy from becoming part of the bankruptcy estate. This exemption does not apply to any and all real estate owned by the filer; it covers only the filer’s primary residence, provided a “declaration of homestead” has been filed with the government of the county in which the property is situated.
The Florida homestead exemption is, comparatively, a generous one, offering an unlimited exemption amount for qualifying property of qualified filers. Many other states limit the amount that can be claimed as exempt to a specific dollar figure. In general, this means that most bankruptcy filers can keep their home if they so choose.
Personal Property Exemptions
Not only is a home typically protected in a Florida bankruptcy, Chapter 222 of the Florida Statutes sets forth a number of exemptions involving personal property as well. Exemptions in Chapter 222 include:
- Medically necessary health aids or equipment prescribed to the person filing bankruptcy or his/her dependent
- Tax refunds (except those that would be garnished to pay arrearages of child or spousal support)
- Pre-tax deposits into medical or health savings accounts
- Prepaid college education trust accounts
- Any personal property in the amount of $1,000 for an individual or $2,000 for a couple (sometimes called the “wild card exemption”)
- Any personal property in the amount of $4,000 for an individual or $8,000 for a couple if not claiming a homestead exemption
- Prepaid hurricane preparedness account deposits
Annuity contract payments arising from an insurance policy, like disability benefits, death benefits or life insurance cash surrender payments are exempt from consideration as a potential source of income for a bankruptcy filing. Generally, annuity payments resulting from lottery winnings are not exempt.
Miscellaneous and Pension Exemptions
This broad category of exemptions covers categories of income and assets not easily classified. These include:
- Receipt of alimony or child support payments
- Damages paid to workers injured in the line of duty at a hazardous occupation
- Pensions paid to Florida county officers and employees, firefighters, state/local police officers, state troopers, teachers and state employees
- Public benefit payments like welfare, Social Security Disability benefits, unemployment compensation, Veterans’ Assistance benefits, work comp benefits and crime victims compensation
Even though the Florida statutes do provide numerous generous exemptions, anyone interested in learning more about the bankruptcy process should contact an experienced bankruptcy law attorney. Taking the appropriate steps to claim applicable exemptions may mean that the only thing you lose in bankruptcy is debt.