Bankruptcy is a process that is designed to provide relief to individuals or businesses that owe money to creditors. The main goal of bankruptcy is to allow a debtor to restructure their debt agreements, reduce the amount that they owe, or, in certain cases, eliminate all or part of their debt.
Although bankruptcy can provide a clean slate to a debtor struggling to meet their debt obligations, bankruptcy may be a long and expensive process and have many different payment variables. Bankruptcy exemptions allow debtors to retain certain assets or property even after they file for bankruptcy.
There are exemption laws at the federal and state levels in the bankruptcy codes. The exemptions that are included in state laws will vary depending on the jurisdiction.
Property that is exempt cannot be sold for the benefit of the debtor’s unsecured creditors. If a debtor wants to protect their property, they will need to claim the appropriate bankruptcy exemption when filing a bankruptcy petition.
If the debtor does not claim any exemptions or if they claim the wrong exemption, their property will not be protected from bankruptcy. Because of this, it is important to consult with a local Florida attorney before making any decisions regarding bankruptcy in Florida.
The bankruptcy chapter under which a debtor chooses to file will determine what will occur to any property that is not exempt. An individual might file for Chapter 7 bankruptcy. In this case, the bankruptcy trustee will sell any non-exempt property and distribute the proceeds from those sales to the debtor’s creditors.
In contrast, if a debtor files a Chapter 13 bankruptcy, they will be able to keep property they own but will have to follow a repayment plan to pay back creditors.
What Are Florida’s Bankruptcy Exemptions?
The federal bankruptcy code contains a list of exemptions. Some states, however, do not use the same exceptions.
Instead, a state may have its own code with its own exemptions. Florida, for example, similar to many other states, has its own state exemptions.
If an individual is filing for bankruptcy in Florida, they will have to use the Florida exemptions in bankruptcy. The State of Florida has favorable exemptions for property owners, which allows homeowners to enjoy great relief when they file for bankruptcy in Florida.
In addition, Florida has favorable exemptions for residential property as well as other exemptions that may benefit an individual in their bankruptcy case. Due to the fact that Florida has many exemptions, it is a great place for an individual to file for bankruptcy if they own a lot of assets.
Examples of exemptions in Florida include:
- Exemptions for wages: Wages for the head of a family are entirely exempt up to $750 per week or greater of 75% or 30 times the federal minimum wage;
- This applies to both paid and wages that are not paid, as well as wages deposited in a bank account during the previous six months;
- Earnings of an individual other than the head of the family are protected by 75% or 30 times the federal minimum wage;
- Depending on the circumstances, Federal government employees are also exempt;
- Homestead exemption: A homestead exemption may help protect a home from creditors in the event of a spouse dying or a homeowner declaring bankruptcy. Florida has one of the most free-handed homestead exemptions in the United States;
- An individual can exempt an unlimited amount of equity in their home or other property covered by the homestead exemption;
- This applies as long as the debtor has lived in Florida for 40 months and the property is not larger than half an acre in a municipality or 160 acres elsewhere;
- The homestead exemption also includes lots that have separate legal descriptions;
- Personal property exemptions: The listed examples of personal property exemptions, or property that is not considered real estate, include:
- Personal property up to $1,000;
- Personal property can include things such as:
- Recreational items;
- Art;
- Electronics;
- Other equipment and up to $4,000 if the homestead exemption is not used;
- Education savings, health savings, and any savings for a natural disaster, such as a hurricane;
- Prescribed health aids;
- Certain medical savings account and health savings account deposits, if they are prepaid;
- Tax credits and refunds; and
- Particular partnership property;
- Vehicle exemptions: The Florida motor vehicle bankruptcy exemption allows a debtor to protect up to $1,000 for their car and is increased if the owner of the vehicle is married;
- Exemptions for pensions: Listed below are the following types of pensions and retirement funds that are exempt in Florida:
- Qualified retirement plans and pensions, which include 401Ks, 403b’s, profit sharing, and other money purchase plans, as well as other defined benefit plans;
- Public employee retirement benefits;
- Firefighter pensions;
- Municipal police pensions; and
- Teachers’ retirement benefits;
- Other exemptions: Because the facts of every case vary, there may be other exemptions that apply to an individual’s situation. A debtor will want to ensure that they are declaring all of the exemptions they are entitled to by contacting a bankruptcy lawyer.
What Are Some Examples of Exempt Properties?
Personal property may be an example of a type of exempt property. As noted above, personal property is any property that is not real estate.
Personal property may include furniture, recreational items, electronics, or art. There are also other personal property exemptions, including:
- Hurricane savings;
- Health savings;
- Any prescription health aids;
- Health savings account deposits; and
- Medical savings accounts.
If an individual is applying for the homestead exemption, any type of real estate may be included under the exemption, including an individual’s residence.
How Can a Bankruptcy Lawyer Help?
Whether or not bankruptcy is the right solution for an individual’s financial problems may depend on several factors, including:
- The individual’s situation;
- The type of debts they have;
- How much of their assets need protecting.
If an individual is considering filing for bankruptcy, they should also consider discussing their options with a bankruptcy lawyer. Although it is possible for an individual to represent themselves pro se, most individuals who file for bankruptcy in the U.S. file with the assistance of a lawyer.
There are several different categories of bankruptcies and different rules that apply to each one. A knowledgeable lawyer is an invaluable resource.
Due to the fact that filing bankruptcy exemptions can be a complex issue, it is important to find the right bankruptcy lawyer. A lawyer can help an individual decide whether or not filing for bankruptcy is the right step for them and which chapter of bankruptcy they should file.
An individual may decide to file for bankruptcy. In that case, their lawyer can help ensure that their property is protected, all of their dischargeable debts are discharged, and their creditors do not violate their rights. A bankruptcy lawyer will also provide an individual with additional details on the exemptions that they may be entitled to and help ensure that they are on the right path to financial recovery.
Do I Need a Florida Bankruptcy Lawyer?
If you are considering filing for bankruptcy in Florida, it is important to consult with a Florida bankruptcy lawyer. Bankruptcy can be a complex process, and filing an exemption incorrectly may lead to the property being confiscated, even if that property would have been exempt had the exemption been filed correctly.
Your bankruptcy attorney will be aware of the particulars for filing for bankruptcy in the state and will recommend which exemptions are right for you. Your lawyer will also be able to recommend other options outside of bankruptcy if there may be one available in your situation.
