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Bankruptcy Attorneys

What property can I keep?

Clients most often want to know what debts they can discharge and what property might they lose or be able to keep in a bankruptcy. Both state and federal statutes can impact these concerns. Therefore, in order to answer these questions, you first have to determine which law applies to your case. Applicable bankruptcy law regarding which property is exempt is determined by the state in which you have been domiciled for the 730 days or two years immediately preceding your filing date. If you have not been a permanent resident in any single state for all of the preceding two years, then the law of the state you have been living in the 180 days preceding that two year period or the law of the state in which you have been living for the longest period of time during that 180 day period will apply.

States can accept all, some or none of the exemption provisions in the United States code. Florida has opted to keep just a few of the federally available exemptions and has enacted its own exemptions, which in some instances, provides much more generous protections. Under Florida’s exemption laws, you are entitled to protect the following property:

Your “homestead,” up to 160 acres of contiguous land if located outside a municipality, or up to one-half acre of contiguous land within a municipality. However, your homestead is not exempt from claims of creditors for taxes and assessments, debts incurred for the purchase, improvement or repair of the homestead, or for debts incurred for the house, field or other labor performed on the property. A mobile home or modular home may be a homestead. The amount is unlimited, however, if you acquired a homestead within 1215 days before filing for bankruptcy, except to the extent of funds used to secure you new homestead from the sale of a prior homestead in the same state, your homestead exemption is limited to $146,560.
Personal property up to the value of $1,000. However, up to an additional $4,000, if you do not claim or receive the benefits of the homestead exemption.
A single motor vehicle not to exceed $1,000 in value.
Professionally prescribed health aids for you or your dependents.
“Earned income” tax refund or credit as defined by section 32 of the Internal Revenue Code.
Wages, salary, commission or bonus, up to $750 per week, are exempt from garnishment or attachment, unless you agree with a creditor otherwise, for “head of family.” Garnishment for “head of family” or anyone else, can never be more than the limits set by 15 U.S.C. 1673, which is a very complicated formula under the Consumer Credit Protection Act. Also, earnings remain exempt for six months after deposited in a bank account, even if commingled with other funds, so long as earnings can be traced and properly identified.
Life insurance proceeds, cash surrender value of life insurance and proceeds from an annuity contract for Florida residents are exempt from claims of creditors of the insured or beneficiary of the annuity, unless the policy, assignment or annuity provides otherwise.
If you are a pensioner of the United States, money you received from a pension within the 3 months preceding an execution, attachment or garnishment process, if, via affidavit, you state the money is necessary for yours or your family’s support.
Money in a retirement plan in accordance with those plans authorized as exempt from taxation by the Internal Revenue Code under sections 401(a), 403(a), 403(b), 408, 408A, 409, 414, 457(b) or 501(a). You can also exempt these funds if the plan is in substantial compliance with the requirements of those sections or if the plan would have been in substantial compliance but for negligent or wrongful conduct of another person. Funds do not cease to be exempt if transferred or rolled-over as per section 402(c) of the Internal Revenue Code. Also, if you receive funds as an “alternate payee” from one of these plans under a qualified domestic relations order, those funds are also exempt from all claims except those made by the Department of Revenue. Lastly, this section is limited by 11 U.S.C §522(n) which states the maximum exemption limit for IRA’s under 408 or 408A, shall not exceed $1,171,650.
Any money you pay into or assets you receive from a validly existing tuition program under section 529 of the Internal Revenue Code, including Florida’s Prepaid College Trust Fund are exempt from bankruptcy.
Money paid into or out of assets from a health savings account or medical savings account.
Money paid into or out of an educational IRA or Coverdell education savings account.
Money paid into or out of a hurricane savings account. This account must be established by you as an insurance policy holder for your homestead property located in Florida to cover twice the amount of the deductible or other uninsured portion of your coverage for a loss from a hurricane, flood or other catastrophic windstorm. Also, the federal government must have enacted legislation that provides for tax-exempt or tax-deferred status for these accounts, which to date it appears they have not.

Also, Florida has accepted the following exemptions from the US Bankruptcy Code:

social security, unemployment compensation or local public assistance benefit;
veteran’s benefits; disability, illness or unemployment benefits;
alimony, support or separate maintenance;
a payment, to the extent necessary for your support, of a stock bonus, pension, profit sharing, annuity or similar contract on account of your illness, disability, death, age or length of service, so long as the plan was not established by an insider who employed you, the payment is on account of your age or length of service, and the plan qualifies under section 401(a), 403(a) and 403(b) or 408 of the Internal Revenue Code. This is limited by to earnings from an IRA under 408 or 408A that do not exceed $1,171,650.

Any property which is not exempt under Florida or applicable federal law is included in the bankruptcy estate. In a chapter 7 case, the trustee may then take and sell all non-exempt property in order to distribute the proceeds to the unsecured creditors according to a priority schedule established under the Bankruptcy Code. Even if certain property is not exempt, you may still have the opportunity to keep it by entering into a “buy-back” agreement with the trustee. If you execute a buy-back agreement, you will make either a lump sum payment or make monthly installment payments over a period of several months.

Keep in mind a few more things about exemptions. The value of property, exempt or not, is not the amount you paid for it, but what it is worth when your bankruptcy case is filed. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.

Also, you only need to look at your equity in property. That means you subtract from the replacement value, any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you have only $10,000 in protected equity should the lender foreclose on the property. However, as long as you continue to make your payments you can keep the home.

Lastly, while your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder, car loan creditor or any other “secured” creditor. These secured creditors can take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you did not file bankruptcy.

“Exemptions” from the estate can be a very complicated matter. Rosen & Rosen, P.A. will gladly assist and advise you every step of the way on these issues. If you or someone you know is considering filing for bankruptcy, call or contact our bankruptcy attorneys today. Let the lawyers at Rosen & Rosen, P.A. serve you.

We are a debt relief agency. In addition to other legal services, we help clients file for bankruptcy relief under the Bankruptcy Code.