Bankruptcy is a debt management solution in which your debt is either restructured, partially forgiven, or a combination of the two. For individuals going through financial hardship and unable to keep up with their payments, bankruptcy becomes a failsafe for regaining control of your finances.

However, when filing for bankruptcy, many are worried that they will become one of the horror stories— put out of their house with only the clothes on their back.

The good news is that the bankruptcy process was made to help individuals, not punish them. As such, Florida bankruptcy laws have many exemptions which help you stay afloat, protect assets, social security, and even retirement accounts from the payments made to your bankruptcy trustee.

Below are some of the most helpful exemptions you need to know when filing for bankruptcy in Florida.

Two Types of Bankruptcy

For individuals looking to file bankruptcy, there are two options available: Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Chapter 7 is considered a “liquidation plan,” offering filers a fresh start on their debt. In this Chapter, there is a focus on debt forgiveness, especially of unsecured debts such as credit cards and medical bills. Out of the two options, Chapter 7 has a longer-lasting effect on your credit score while labeling you as a credit risk to future lenders for up to 10 years.

Chapter 13 bankruptcy is considered a “wage earner’s” plan. Here, less debt is forgiven and you instead work with a lawyer to develop a monthly budget to restructure your debt and repay it in installments. These payments take place over the course of 3-5 years. As this form of bankruptcy allows you to repay what you owe, it remains on your credit record for a shorter period of time— normally 5-7 years.

No matter which bankruptcy option you choose, there are several exemption laws available to shield some of your assets from potential loss. These are listed below.

First, The Florida Residency Requirement

While some states allow for individuals to choose between state or federal bankruptcy exemptions, those living in Florida must use state-level exemptions.

As such, Florida instates a residency requirement for those filing bankruptcy. Through this rule, you are only able to utilize Florida exemptions if you have resided in the state for at least 2 years prior to filing.

If you do not meet this requirement, you are bound to the exemptions listed by the state in which you resided 2 years prior to filing.

Common Florida Exemptions

Across all states, the saving grace of bankruptcy proceedings are the exemptions. Exemptions are monetary funds or assets that are saved from the bankruptcy process, and they are often high enough where individuals filing will lose few, if any, of their personal belongings.

Exemptions are based on either a cash amount or the amount of available equity in a given asset. This means that if you have property secured by a loan such as a car or home and your equity in the product is below the exemption threshold, you can elect to keep the item through and after your bankruptcy.

For many, the following exemptions are the most common.

Homestead

Florida’s homestead exemption is one of the most generous in the country, allowing for an unlimited amount of equity in a home to be exempt from bankruptcy. However, because of this extreme leniency in home equity, there are other qualifications you must meet to qualify for this exemption.

  • You must own the home for a minimum of 1,215 days 
  • Your property cannot exceed half an acre, or, in more rural areas, 160 acres

If you are unable to meet these requirements, you will default to the federal homestead exemption as an exception to the rule.

You may also opt-out of the homestead exemption in favor of a larger wildcard exemptions, the features of which are listed below.

Wildcard

For individuals who do not own a home Florida’s wildcard exemption allows for $4,000 of equity to be protected from the bankruptcy process. For individuals that do own a home and are participating in the homestead exemption, this wildcard can protect up to $1,000.

How you use the wildcard is entirely up to you and creates a buffer for assets that may not be covered under other exemptions.

Personal property

Personal property exemptions are limited to $1,000 that can be applied toward furniture, clothing, and other personal assets.

Motor Vehicle

This exemption applies if you have $1,000 or less in equity in your vehicle. If your vehicle needs to be sold, its value is determined by how similar makes, models, and conditions perform on resources such as Kelly Blue Book.

Pensions

There are several types of ERISA qualified pension and retirement savings that are entirely exempted from the bankruptcy process. These include the following types of exempt accounts and/or benefits:

  • 401(k)
  • 403(b)
  • SEP and Simple IRAs
  • IRAs and Roth IRAs valued up to 1,171,650
  • Pensions covered under federal tax exemptions

Make note that when filing jointly as a married couple, each individual can take advantage of the full amount of the exemptions listed above. This doubles the full amount of exempt property and assets one is allowed to claim.

For a full list of Florida exemptions and their associated statutes, please see this resource for further information.

Non-Dischargeable Debt

Even with Florida’s generous exemption policies, there are several classifications of debt that are non-dischargeable and must be paid no matter what your financial circumstances. These include:

  • Debts owed to law enforcement (such as criminal activity or traffic tickets) and debts owed as compensation if you were found guilty in a personal injury lawsuit
  • Tax debt, including any income tax debt within the previous 3 years
  • Child support and back child support
  • Student loans

What About Non-Exempt Property?

Especially pertinent for individuals looking to file for Chapter 7, any non-exempt property can be sold by your Chapter 7 trustee to help repay your debt. If you believe you are unable to remain within the exemption thresholds, make sure to speak with your lawyer about what other options are available to you.

Finding Florida Law Experts

While this article can serve as an initial overview, understand that to really know what exemptions your specific situation qualifies for, you will need to speak with a bankruptcy attorney. This will make sure you are aware of any exemptions not listed here, any special circumstances to keep in mind, and whether or not the bankruptcy code has changed to reflect different rules or dollar amounts.

In times like these, having a legal team is integral to helping you regain control of your debt. At Dave Roy Law, this is what we help you achieve.

Located conveniently in West Palm Beach, we can handle all your interruption insurance needs. Staffed with experienced lawyers, there is very little we have not seen. Start on the right foot by contacting us at 561-729-0095 to schedule an appointment and get your business back on the right track.

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