EXEMPT AND NON-EXEMPT PROPERTY

When you file a Chapter 7 bankruptcy, the Trustee sells your non-exempt property and distributes the money to your unsecured creditors. The Trustee cannot take your exempt property and sell it for the benefit of your creditors.

Under the new bankruptcy law the state exemption law applicable to your bankruptcy is determined by the state in which you have been domiciled for the 730 days (two years) immediately preceding your filing date. If you have not been a permanent resident of Florida for the two-year period immediately preceding your bankruptcy, then your bankruptcy exemptions will be those allowed by the state in which you were domiciled for 180 days immediately preceding the two year period, or the state in which you were domiciled for the longer portion of such 180-day period.

A person filing bankruptcy in Florida today is eligible for the property exemptions he could have claimed if he had filed two years ago. If the person was a resident of a different state 24 months ago, then he is entitled to the exemptions of the state of his previous residence.

Your homestead is exempt property 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. The new bankruptcy law does not affect homestead protection for Florida residents in state court proceedings.

The new bankruptcy law does change the homestead exemption for Florida residents who file bankruptcy. Under the new law you 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 months the new law exempts up to $137,000 of equity. The exemption amount is increased (effective April, 2007) from the original $125,000 to approximately $137,000 per person. Additionally, if you injected cash in your home within the 40 months, such as by paying down the mortgage or making home improvements, the amount of investment made within the 40 months will not be exempt even if you purchased the home 40 months prior to filing. The $137,000 homestead exemption limit applies only in bankruptcy cases. Several courts have held that a married couple filing together can claim two homestead exemptions for a total homestead protection of $274,000.

2. Statutory Exemptions

Chapter 222 of the Florida Statutes includes several categories of exempt property, including: pensions, 401K plans, tax deferred retirement plans, Social Security income, disability income, IRAs, annuities, cash value of life insurance, college investment plans (including 529 Plans), health savings accounts, and hurricane savings accounts.

3. Vehicle Exemption

 You are allowed to exempt $1,000 of equity in an automobile. Spouses who jointly own a car may exempt $2,000 of value in that car. Most bankruptcy trustees use the average retail/wholesale value from the yellow NADA book, adjusted for the condition of your car. If the balance of your car loan is greater than the car value (“upside down”) then you have no car equity and your car is protected in bankruptcy so long as you keep your car payments current.

4. Personal property exemption

Each bankruptcy debtor is allowed to exempt $1,000 ($2,000 for joint filings) of all personal property including furniture, clothes, tools, and cash in pocket. The value of your personal property is the current fair market value at a public market such as a garage sale or flea market sale. A new Florida statute effective July 1, 2007, provides a $4,000 "wildcard" personal property exemption to bankruptcy debtors who do not claim a homestead exemption. You must not own a home, or you intend to surrender the home you own to the mortgage lender in order to qualify for the wildcard exemption. Joint debtors can claim an $8,000 wildcard exemption.

Non-Exempt Property

Any property which is not exempt under Florida law is included in the bankruptcy estate.  The Chapter 7 Trustee may take and sell all non-exempt property and distribute the proceeds to the unsecured creditors.  You may keep your non-exempt property by entering into a "buy-back" agreement with the Trustee.  In this scenario, you will either make a lump sum payment to the Trustee or make monthly installment payments over a period of several months.