Florida’s Head of Household Exemption Can Help You in Bankruptcy
You are filing for bankruptcy, and when you do, you have some money in the bank. Not a lot—the money only represents what is left of perhaps the last few paychecks. Certainly, Florida’s bankruptcy exemptions allow you to exempt or protect between $1,000 – $4,000 of personal property. But is there another way to protect money that you have sitting in the bank?
The Head of Household Exemption
There is no express bankruptcy exemption for money that you make at work and that you deposit. However, there is an exemption called Head of Household.
The Head of Household exemption is usually asserted as a defense to collection actions filed by creditors who are looking to collect on a judgment, but it has a use in bankruptcy as well.
What is the Head of Household exemption? If you pay at least half of the expenses in your household for or to support dependents, and you make less than $750 per week, you qualify to have your earnings completely exempted from either collection actions (including wage garnishments that collectors may try to enforce against you), or from being taken in bankruptcy.
The protection is pretty broad: earnings includes bonuses, commissions, and any other kind of salary. “Dependent” includes but is not limited to minor children.
If you make more than $750 per week, only the amount that exceeds $750 per week can be taken—so the exemption is limited that way, but you still get the benefit of the first $750 per week amount no matter how much more than that you make.
And even with that amount, just like creditors, bankruptcy courts can be limited to taking only some of that money—federal law does not allow more than 25% of a consumer’s disposable income to be taken to satisfy a judgment. That federal law limitation applies regardless of whether you qualify for Florida’s Head of Household exemption or not.
Self-employed consumers may want to make sure that they are paying themselves in a regular way that stays at or near the exemption. That should be consistent—a bankruptcy court will look skeptically on a self-employed consumer who, for example, was earning $2,000 per week, and then before the bankruptcy suddenly gets paid $750 per week.
Florida’s Head of Household exemption is especially useful to bankruptcy consumers because it not only protects regular income but any income that is in a bank account which was deposited or earned in the last 6 months. So, as long as you can trace the money in your bank accounts to your earnings, and you otherwise qualify for the Head of Household exemption, that money will be protected—and protected without using any of your $1,000 – $4,000 property exemption.