Things to Know About Keeping Your Home When Filing for Bankruptcy
One big benefit of filing for bankruptcy in Florida is that if you own a home, your property is generally protected from being taken by the bankruptcy court to pay creditors. But Florida’s homestead exemption is not absolute, and it only applies in certain circumstances.
Florida’s Bankruptcy Laws
The first requirement to getting the benefit of Florida’s homestead exemption laws is that the Florida bankruptcy laws must apply to you. Just because you file for bankruptcy here in Florida doesn’t mean Florida laws apply to you.
In order to get the benefit of the homestead exemption (as well as any other Florida laws that protect property in bankruptcy), you must live in Florida for at least 40 months before filing. This law was put into place to keep people with property from moving to Florida and filing here to protect the property.
If you haven’t lived in Florida for the required amount of time, whatever state you lived in the longest in the prior 180 days will be the state’s bankruptcy exemption laws that apply to you.
Homestead Exemption Limits
So if you have lived in Florida for 40 months or more, and you file for bankruptcy, your property is protected from being taken by the bankruptcy court so long as your property is smaller than a half of an acre in a city environment, or 160 acres in rural areas (ask your bankruptcy lawyer if you are uncertain whether your property is in a city or rural area for bankruptcy purposes).
What if you haven’t lived in Florida for the required 40 months? Your homesteaded property is still protected, but only up to $160,375 in equity (this is the limit under federal bankruptcy exemptions). That limit is not the same thing as the value of your home. For example, if you have a $500,000 home with a $400,000 mortgage, your equity is only $100,000, and thus, your homesteaded property would still be exempt.
However, there is still one more hurdle that must be met before you get the full benefit of the exemption. You must have owned the property for 1,215 days before filing your bankruptcy. If you have not owned the property for this long, you will be subject to the same $160,375 exemption limit.
If you are married and you are filing your bankruptcy jointly and the property is owned by both spouses, the exemption limit is doubled. Remember, the exemption limit is only relevant for those who don’t meet the time requirements that Florida law requires. If you do—you have owned the property for more than the 1,215 days and lived in Florida for 40 months—the entire value of your property is exempt.
What is a Homestead?
You also should make sure that you have used the property as your primary residence, and that you have declared it as your homestead with the city or county in which you live. Investment homes, homes owned or titled in a corporate name, or second homes, cannot be homestead properties.