Can You File Bankruptcy and Keep Your House in Florida?

When people consider filing for bankruptcy, one of the first questions they often have is regarding whether they will or will not lose their home and other major assets. The home, especially, is of paramount concern for those who are facing overwhelming debt, since housing can be difficult to come by when you’re already struggling financially. One of the most common questions posed to the staff at Van Horn Law Group is “can you file bankruptcy and keep your house in Florida?” 

Florida is one of the best states to live when it comes to filing bankruptcy. Why? Because the state of Florida has a very generous allowance called the homestead exemption. While federal law is what ultimately governs bankruptcy, state law is also important – especially when it comes to bankruptcy exemptions.  

What Are Bankruptcy Exemptions?

Simply put, a bankruptcy exemption is a law that allows those filing bankruptcy to keep an asset regardless of the fact that they might otherwise be surrendering their means in the bankruptcy agreement. While the permanent loss of property and major assets I one of the biggest fears people have when considering bankruptcy, exemptions protect these assets when they serve a practical and necessary purpose, such as transportation and housing. These exemptions vary by state and situation, and they may even protect property and other major assets if bankruptcy is not filed.  

The basic point of bankruptcy exemptions is to keep people in their homes, their jobs, and help them to continue participating in society regardless of their financial struggles. They aim to protect everyday necessities for the health, wellbeing, and functionality of the person and their family. Some examples of things that might be protected by bankruptcy exemptions include:  

• Personal property
• Automobiles
• Property used as housing
• Items used as health aids, tools of the trade, or other necessities
• Retirement accounts
• Unemployment or workers’ compensation
• Alimony or child support payments
• Crime victim awards such as personal injury payments
• Life insurance
• Social security benefits
• Veteran’s benefits and other government benefits

The exemptions that would allow you to keep or continue to benefit from these assets vary widely, as every state has its own laws about what can be claimed as an exemption. Florida has one of the most generous allowances when it comes to exemptions for homeowners. This is because of the homestead exemption, which is one of the best in the nation.  

What is the Florida Homestead Exemption?

The Florida homestead exemption answers the question “can you file for bankruptcy and keep your house in Florida?” with a resounding “YES!” This is because the real estate designated as housing for you and your family is exempt from any bankruptcy agreement. How this is handled differs from one chapter of bankruptcy to the next, but in general, it allows for you to keep your primary residence – even if others must be surrendered.  

In chapter 7 bankruptcy, your appointed bankruptcy trustee will seize and sell nonexempt property and assets to offset the costs of your unpaid debts. This will not include your exempt homestead property. In many states, you being able to keep your home through this exemption will depend on its value, allowing you only to keep property up to a certain dollar amount of value. However, Florida law allows you to exempt your homestead property up to an unlimited value. This means no matter how much equity is tied up in your home, you can keep that home as part of Florida’s homestead exemption. 

In chapter 13 bankruptcy, the appointed trustee will not seize or sell your assets. Rather, you will be responsible for paying the equity value of your nonexempt property, or your total determined disposable income – whichever is greater. To determine what your disposable income is, your bills and other necessary expenses will be deducted from your total income.  

Many people opt for chapter 13 bankruptcy, since you won’t have to surrender any of your property or major assets as part of the agreement. Instead, you will negotiate with creditors via the agreement to repay your debts in full over a three-to-five-year period. So how does the Florida homestead exemption even factor into chapter 13 bankruptcy? Because in this chapter of bankruptcy, any unsecured creditors you may owe are entitled to receive at least the same amount that they would receive in a chapter 7 agreement. Since your home is protected by the homestead exemption in chapter 7, though, this means that they are not entitled to its equity in a chapter 13, either.  

Who is Eligible for the Homestead Exemption – and How Do You Claim It?

Eligibility for the Florida homestead exemption is almost as generous as the exemption itself. To claim this unlimited-value exemption, you’ll need to be able to prove that this property if your family’s primary residence. You will also be required to demonstrate the fact that you have owned this property for at least forty months.  

It is important to note that filing for chapter 7 bankruptcy in Florida will not stop the bank from collecting on your home loan if it is past due. If you intend to file for chapter 7 bankruptcy in Florida, you will first need to ensure that you are current on your house payments. Otherwise, your property may not be eligible for this exemption and your property may be surrendered in the agreement.  

So – Can You File Bankruptcy and Keep Your House in Florida?

So, now that you understand the homestead exemption, can you file bankruptcy and keep your house in Florida? Yes, you absolutely can. Almost without exception, homeowners in Florida who have resided there past the forty-month mark can claim their primary residence as part of the homestead exemption. However, if you aren’t sure whether your home qualifies, it pays to consult with a lawyer before filing.  

The experienced staff at the Van Horn Law Group are wholly familiar with the homestead exemption and how to apply it to any bankruptcy case. For more information and to consult with our experienced bankruptcy lawyers, give us a call today!