• Chapter 7 Bankruptcy Exemptions in Florida

In Florida, Chapter 7 bankruptcy filers are eligible to claim exemptions.

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The applicable exemptions are determined by the state where the debtor has been domiciled for 2-years prior to filing bankruptcy.

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Domicile is not the same as residency. Florida residents living part of the year in other states, are not eligible to use Florida exemptions when filing for Chapter 7 bankruptcy. Debtors in these cases need to claim bankruptcy exemptions allowed by the state that they were domiciled for 180 days immediately before the two-year period, or the state where they were domiciled for more than 180 days.

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Therefore, debtor’s filing bankruptcy in Florida today, qualify for property exemptions that could have been claimed, had the debtor filed two years ago.

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If a debtor was a resident of Florida 2 years ago, then the debtor is eligible for the Florida exemptions today. Alternatively, if the debtor resided outside of Florida, then any exemptions the debtor may be entitled to would be for the state of debtor’s prior residence if any or federal exemptions.

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• What is Florida's Homestead Exemption?

Florida’s Homestead Exemption provides protection from creditors. The homestead protection extends on the primary residence of unlimited value, so long as the debtor has lived in Florida for at least 40 months. Florida’s Homestead Exemption applies to property less than half an acre within a municipality and up to 160 acres outside a municipality. The exemption provides protection for the entire amount of money invested on a homestead property. Moreover, a debtor can purchase an exempt homestead property even after being sued. In Florida, the homestead exemption rules apply in state court collection actions. If the debtor fails to meet the 40-month residency requirement, Florida’s homestead exemption is capped by federal law at $160,375.

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Florida’s homestead exemption in Chapter 7 bankruptcy has some value caps and limitations on the date of purchase. As of 2021, federal bankruptcy law limits a debtor’s Florida homestead exemption to $160,000, if the debtor owned the real property for less than 40 months prior to filing a Chapter 7 bankruptcy.  Debtors who jointly file a Chapter 7 bankruptcy can protect a jointly owned homestead for $320,000. The exemption number increases over the years, but the exemption limits mentioned here are as of 2021. Debtors who have lived in their Florida homestead for more than 40 months, have no cap as to the value of their homestead.

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In addition, under Florida bankruptcy law, if a debtor invests non-exempt funds in a property within 10 years of filing a Chapter 7 bankruptcy, the bankruptcy trustee may challenge the debtor if the trustee suspects that it was intended to defraud creditors.

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Bankruptcy law is federal law, and in certain cases federal law will prevail over state law. Florida’s homestead exemption in a Chapter 7 bankruptcy is used differently than in Florida state courts.

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• What Are Objections to Bankruptcy Exemptions?

After the 341 meeting, the bankruptcy trustee has 30 days to object to any property exemption claimed on the debtor’s petition.

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If an objection to a claimed exemption is filed by the trustee, a hearing will be set by the Court. The debtor will have been given an opportunity to support the validity of the exemption at the hearing. If no objections are brought by the trustee within 30 days following the filing date, all property claimed on the petition as exempt by the debtor will be excluded from the bankruptcy estate and exempted in the Chapter 7 bankruptcy.

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• Chapter 7 Bankruptcy Adversary Claims and Objections

During the Chapter 7 bankruptcy proceeding, a creditor who believes its debt should not be discharged can file an adversary case.

 

Fraud is the most common reason that compels a creditor in filing an adversary case. Fraud in a bankruptcy case is not in the criminal context, but rather that the debtor took advantage of the creditor and the bankruptcy process.

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If the debt was incurred during the debtor’s planning a Chapter 7 bankruptcy filing, the creditor would have sufficient basis for an adversary case. The bankruptcy discharge would be set aside for fraud.

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• What is a Report of No Distribution?

If the debtor has no non-exempt assets for the trustee to liquidate, the trustee may issue a “Report of No Distribution.” This report notifies the debtor, the court, and the creditors that the debtor has no assets with which to pay any portion of the creditor’s debts. This is known as a no-asset case.

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• What are Asset Cases?

Asset cases, are cases in which the debtor either owns property:

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•  Which does not have an applicable exemption

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•  The value of the property exceeds the allowable exemption for that type of property

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Asset cases will remain open until the trustee notifies the bankruptcy court that their work on the case is completed. The length of this process can vary significantly and is dependent on the type of property being sold by the trustee as well as other factors in the case.

 

Depending on when the debtor files bankruptcy, the trustee may wait until the debtor files the previous or current year’s tax return to close this case. There is no specific exemption related to a federal tax return refund. There is an exception if part of the debtor’s refund is due to Earned Income Credit, which is exempt under Federal and Florida law. The debtor may be able to use his or her personal property exemption to claim a federal tax return refund as exempt property. Consulting with an experienced bankruptcy attorney may be able to guide you with what property may be claimed as exempt property.