Financial hardship can happen to anyone. It leaves us in a place where we have to decide whether bankruptcy is the best option for debt relief. Often, the assets we own determine what option is best. Different states have different rules for what assets are exempt from bankruptcy. Florida is no exception.
This article will present the Florida bankruptcy exemptions found on the Florida Statutes Government website in an understandable format. In addition, this article will include alternative options for assets that exceed exemption limits. For example, even though you may qualify for a Chapter 7 bankruptcy, a Chapter 13 bankruptcy in Florida or debt settlement may be better alternatives if you have a large equity position in an automobile over the allowable exemption. Thankfully, in Florida, trustees rarely pursue the equity in your home. One of the only ways that a Trustee could possibly go after a person’s home is if the person moved to Florida from another state and they either can’t use Florida’s exemptions, as we will discuss below.
Two things to note about Florida Bankruptcy Exemptions:
- In the world of bankruptcy exemptions, there are state and federal bankruptcy exemptions. Florida is a state that allows you to only use the state bankruptcy exemptions.
- You must have lived in Florida for at least 24 months before bankruptcy filing to take advantage of the Florida bankruptcy exemptions. If you haven’t, John R. Bates created an excellent guide to exemption options for nonresident debtors.
Florida has certain statutes and bankruptcy exemptions that you must consider when filing a bankruptcy. If you have an asset that is above the Florida exemption, that asset could be liquidated. Below are some of the most common bankruptcy exemptions for Florida. Let’s get into the numbers. We cover the most common examples, but recommend that you visit the government website to review all of the data.
Florida Bankruptcy Exemption List
- Homestead Exemption. Unlimited exemption amount if the debtor is eligible for Florida exemptions and has owned the property for more than 1,215 days. If the debtor hasn’t owned the property for more than 1,215 days then only $170,350 is exempt.
Automobile Exemption. Up to $1,000 per debtor in one vehicle. If the case is a joint case, a couple can exempt $2,000 for one vehicle, but can’t exempt $1,000 each in 2 vehicles.
Personal Property Exemption: $4,000 If the debtor doesn’t receive the benefit of Florida’s constitutional homestead exemption. This is important because Florida has a statute that gives 100% exemption for vehicles/vessels that qualify for homestead. A debtor can use the statutory homestead and the expanded wildcard exemption.
- 401(k) Plan: Exempt
- 403(b) Plan: Exempt
- IRA: Exempt
- Alimony: Exempt
- Annuities: Exempt
- Disability Income and Benefits: Exempt
- Health Savings Account: Exempt
- Social Security Benefits: Exempt
- Unemployment Compensation and Benefits: Exempt
- Worker’s compensation: Exempt
Not covered here include less common exemptions such as illness benefits, firefighter pensions, retirements involving stock. However, we encourage you to research those unique Florida bankruptcy exemptions at the Florida Debt Statutes and Exemptions Government website.
Your Options When Above Florida Bankruptcy Exemptions
Florida has some of the more generous bankruptcy exemption laws, but let’s say there’s an example that you own a vehicle outright that is valued at $15,000 and you also qualify for a Chapter 7 bankruptcy. There’s an opportunity to still do the Chapter 7 bankruptcy, but the trustee will most certainly liquidate the vehicle to payoff some of the creditors. You have a couple more prominent options:
Chapter 13 Bankruptcy:
This is consider the wage earner’s chapter of bankruptcy. You would be setup on a 3 or 5 year plan that would be a set monthly rate based on what you can afford. This option is generally more expensive that a Chapter 7 after legal fees, but it is a valid option for many folks who are above the exemptions
Debt Settlement is where a company or you would negotiate a lower amount owed with the creditors directly because of the financial hardship that is preventing you from paying your bills. For example, a debt settlement company would try to negotiate a $10,000 credit bill down to $5,000. This option would still negatively affect your credit and there are fees associated with this option, but it is a valid option for many and can be quicker than a Chapter 13 bankruptcy depending on how aggressive you are with negotiating and paying off the debt.
Debt Management is where a company would would negotiate a lower interest rate with your creditors because of a financial hardship. For example, a debt management company would try to negotiate a credit card’s interest rate from 22% to 8%. This option is often the most expensive of the debt relief options and can work best for credit cards, but debt management is a valid option for many folks.