Can I keep my home if I file for bankruptcy?
Generally speaking … yes!
The reason why most folks can keep their home when filing for bankruptcy in Florida is due to the very liberal “homestead exemption” that is afforded to debtors in Florida.
Bankruptcy exemptions enable debtors to declare different types of property as “exempt” (or protected) so that after you file your bankruptcy case, the bankruptcy trustee (who gets assigned to your case by the Court) could not look to sell the property in an effort to get in money to repay your creditors.
The laws which govern the Florida homestead exemptions are Fla. Const. art. X, § 4(a)(1) and Fla. Stat. Ann. §§ 222.01 & 222.02.
While the text of these laws are listed below, they basically state that, no matter how much your home is worth or how much equity you have in your home, it is completely exempt from most creditors if :
It is your homestead (i.e. your residence where you live)
It is no more than ½ acre in size (for properties located inside a municipality); or
It is no more than 160 acres in size (for properties located outside a municipality)
You have owned it for at least 1215 days (i.e. 3.32 years) prior to filing your bankruptcy.
If you do not meet the above-listed requirements to claim the Florida homestead exemption, then you would need to use the federal homestead exemption. The law which outlines the federal exemption is 11 U.S.C. § 522(d)(1).
This law states that if you have less than, or equal to:
$23,675.00 (if filing an individual bankruptcy); or
$47,350.00 (if filing a joint bankruptcy and the home in in you and your spouse’s names)
in equity in your home, the bankruptcy trustee cannot look to sell your home. Conversely, if you were to have more than $23,675.00 in equity in your home, there is a chance that the trustee could look to sell it. However, even if the trustee was considering trying to sell the home, we can always attempt to “strike a deal” with the trustee wherein you are allowed to keep your home and you pay the trustee the amount of “excess equity” you have in your home over the next 3-12 months.
Fla. Const. art. X, § 4(a)(1):
SECTION 4. Homestead; exemptions.—
(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person:
(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner’s consent by reason of subsequent inclusion in a municipality; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family;
Fla. Stat. Ann. §§ 222.01 & 222.02:
222.01 Designation of homestead by owner before levy.—
(1) Whenever any natural person residing in this state desires to avail himself or herself of the benefit of the provisions of the constitution and laws exempting property as a homestead from forced sale under any process of law, he or she may make a statement, in writing, containing a description of the real property, mobile home, or modular home claimed to be exempt and declaring that the real property, mobile home, or modular home is the homestead of the party in whose behalf such claim is being made. Such statement shall be signed by the person making it and shall be recorded in the circuit court.
(2) When a certified copy of a judgment has been filed in the public records of a county pursuant to chapter 55, a person who is entitled to the benefit of the provisions of the State Constitution exempting real property as homestead and who has a contract to sell or a commitment from a lender for a mortgage on the homestead may file a notice of homestead in the public records of the county in which the homestead property is located in substantially the following form: