What assets are protected in bankruptcy in Florida?

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What assets are protected in bankruptcy in Florida?

You may be aware of the beneficial outcomes of bankruptcy that you’ll be left with after your debt is discharged. Examples include a clean financial slate and no more creditor harassment. 

However, it is important to remember what assets you may be risking in the process. Specifically, individuals filing for Chapter 7 bankruptcy may be required to surrender certain assets. A Chapter 7 bankruptcy discharges all unsecured debt after surrendering all applicable, non-exempt assets to be sold by a trustee, who then distributes those funds pro rata, by priority, to creditors.

The good news is that many individuals who file for Chapter 7 bankruptcy have so little held assets that they are not forced to liquidate anything. In fact, only 7% of Chapter 7 petitions involved liquidable assets, and the rest are recorded as ‘no asset,’ cases.

If you have specific questions about your unique personal property and if it is applicable for exemption, then you want to speak with an experienced Florida bankruptcy attorney. They can answer any questions about your beloved possessions and help you protect as much of your property as possible while still seeking to discharge your unsecured debt. They can also tell you what you can lose if you file for bankruptcy.

Protect Some Of Your Assets With Exemptions

When you file for bankruptcy, you have the option of filing with federal or state exemptions unless it is an “opt-out” state. Florida is an opt-out state, which requires petitioners to file using their state’s exemptions, instead of having the option to file under the federal exemptions. 

Thankfully, Florida has some of the most generous exemptions in the country, so you may be able to protect most or all of your assets simply by exempting them from liquidation. In fact, the reason Florida’s residency rule is so strict is so that petitioners from other states won’t try to take advantage of their exemptions. 

How do you exempt assets? By sending in records of your real and personal property, your lawyer can file for all of your allowed exemptions on your behalf with no additional work on your part. 

Homestead Exemption And The Wildcard Exemption

Saving their primary residence is usually the most pressing exemption that petitioners want to know about, as the homestead exemption protects the equity of your home from being liquidable to collectors. 

This is where Florida gains the reputation of being the most generous with exemptions, as the state’s homestead exemption is unlimited. In other states, the amount of money you have paid into your home — its equity — is considered an asset. If your equity surpasses the state’s limit, then you could be forced to choose between saving your home and finding ways to come up with the value sought through liquidation. Put another way, the payments you have made can turn an asset into a liability, even if your mortgage was not yet in jeopardy.

In Florida, however, your home could be worth millions of dollars, but as long as you are a permanent resident, or have lived in the state for over 730 days (prior to filing) with the intention of making the home your primary residence, your home is protected from liquidation. Note that a second home, such as an investment property or a vacation home, is not applicable for homestead protection.

It is important to understand that a homestead exemption is not automatic, and it needs to be secured before a collector puts a lien against your home, or else the exemption cannot be honored. 

The wildcard exemption allows petitioners who are not taking advantage of the homestead exemption a credit of $4,000 to be used on any other property, like heirloom jewelry or a vehicle. The exemption is designed to allow the petitioner to decide what is the most important to them, instead of settling for specific itemized exemptions alone. 

While Florida’s homestead exemption is the most generous in the nation, the state does have some lean exemption amounts in other areas. That factor makes this wildcard exemption so special for many petitioners. 

Wage And Other Exemptions

The wages of the head of the household are protected up to $750 per week. Other family members may protect their wages up to 75%, or 30 times the federal minimum wage (whichever number is greater applies).  With the federal minimum wage at $7.25, that makes 30 times equal to $217.50. 

Other exemptions include public benefits like social security and unemployment, IRA’s and 401(k)s, and investment accounts with the beneficiary as another person, not petitioning for bankruptcy (like a child’s 529A college account). Some property in business partnerships is also exempt. 

Reaffirmation Of Debt

A reaffirmation agreement lets the petitioner keep the collateral of a secured debt by paying a portion or all of the money owed on the item. These agreements are completely voluntary, meaning they are made at the debtor’s behest and the creditor’s discretion. They must then be approved by a bankruptcy court before being considered a binding agreement. 

A court will usually only approve a reaffirmation agreement if the following circumstances are met: 

• It is in the best interest of the bankruptcy petitioner
• It is proven to be voluntary
• The borrower has the financial capability to repay the debt
• The petitioner is receiving something of equal or greater value to the payment the collector is receiving
• The petitioner is given a 60 day grace period to rescind their reaffirmation agreement. 

Under these arrangements, you can pay off certain items that you wish to keep in your possession, while still moving forward with discharging the remainder of your debt. The bankruptcy code has given petitioners multiple ways to keep important possessions, so if you’re unsure about what you need to do to protect your property, contact a nearby bankruptcy attorney! 

Hiding Assets

Refusing to disclose assets, i.e. hiding them, in a bankruptcy case is a violation of the bankruptcy code and could lead to serious consequences. It is considered fraud to hide assets in a bankruptcy proceeding. This includes transferring the title of property or investments with the intention of protecting it from liquidation in your bankruptcy case.

Similarly, paying off certain secured debts immediately prior to your bankruptcy filing could be seen as preferential treatment to a particular creditor. If the repayment was completed within 90 days of the filing, the trustee presiding over the case may reverse the payment or even seek to reclaim the money in what’s known as a “clawback” lawsuit.

The most productive method of protecting valuable assets varies depending on the unique circumstances of your case, so before you partake in an activity that could harm your ability to proceed, talk with a lawyer to see what they can do for your possessions. 

Find a Reputable Bankruptcy Attorney to Take on Your Case Today

Our bankruptcy team at Hoskins, Turco, Lloyd & Lloyd offers completely free case reviews with no commitment necessary to anyone considering the bankruptcy process. Our goal is to ensure that you have the clearest understanding of your case — including everything you may end up surrendering for liquidation — before beginning your petition. Having an attorney is the best way to protect as many of your assets as possible without having to illegally hide your assets.

We’re excited to help! Contact us online or call (866) 930-6435 to schedule your free consultation now.