Florida has seen an unprecedented influx of new residents in the last two years. During the same period, the U.S. economy faltered somewhat, putting many Floridians in a difficult financial position. Bankruptcy is an effective vehicle for getting back on one’s feet financially, but those new to the state may wonder about Florida bankruptcy laws and the rules that apply. Here is what all Florida residents should know about our state’s bankruptcy process.

Florida Bankruptcy Law May Not Apply 

Each state has its own exemption laws designed to give people a fresh start by allowing them to retain their essential belongings, such as a home or car. Exemption laws vary from state to state and are typically determined by place of residence. That being said, someone filing for bankruptcy in Florida must have lived in the state for two years before its exemption laws apply. This requirement was enacted to avoid “forum shopping” – moving to a state with the most favorable exemption laws before filing for bankruptcy.

When filing for bankruptcy, a newcomer to Florida will be subject to the exemptions from the state where they spent the most time for the six months preceding the two-year look-back period.

Florida Homestead Bankruptcy Exemption

Florida bankruptcy laws will apply if someone filing for bankruptcy has been living in Florida for over two years.

Florida is an “opt-out state,” meaning federal exemptions are not available to filers. However, Florida’s exemption laws are considered to be generous. Florida’s homestead exemption, in particular, is well-known, but an important point needs to be made. The Florida Constitution provides all Floridians the privilege of unlimited homestead protection against judgment creditors regardless of the length of their residency. But in a bankruptcy situation, the Florida homestead exemption provides creditor protection to a primary residence of unlimited value only if the debtor has resided in the state for 40 months or more. If the 40-month residency requirement does not apply, the homestead exemption is capped by federal law at $160,375.

The law also dictates that:

  • The exempted property cannot be larger than half an acre when located in a municipality (or 160 acres if located elsewhere.)
  • Property may include contiguous lots with defined legal descriptions and separate tax numbers.
  • Mobile homes do not fit the definition of a homestead, but they are exempt under Florida Law Chapter 222.
  • An investment property does not qualify for a Florida homestead exemption.

Other Common Florida Bankruptcy Exemptions 

While these exemptions are correct as of the writing of this blog, amounts are subject to change at any time. Always consult an experienced bankruptcy attorney to ensure that the information you are working from is up to date.

The top 5 exemptions under Florida state law include:

  1. Homestead Exemption: This exemption is unlimited for individuals who have maintained a permanent Florida residence for more than 40 months. The property must be no larger than a half acre when located in a municipality or 160 acres in other areas.
  2. Vehicle Exemption: The exemption is provided up to $1,000, but may be more if married or filing jointly.
  3. Personal Property Exemption: This exemption is available up to $1,000; and may include art, electronics, or furniture. If the filing party is not claiming a homestead exemption, up to $4,000 may be allowed.
  4. Wage Exemption: The wages of the head of the family can be fully exempted up to $750 per week during the last six months.
  5. Pension or Retirement Exemption: A filing party’s 401(k)s are considered exempt, while IRAs (including Roth IRAs) are exempt up to $1,171,650.

Filing for a Florida Bankruptcy

If you currently live in the Sarasota or Tampa area, you should discuss your situation with a Florida bankruptcy attorney. Richard V. Ellis has the expertise needed to navigate the complex bankruptcy process. Call today to learn more.