Chapter 7 bankruptcy involves the administration of what is called your “bankruptcy estate.” The bankruptcy estate comprises all of your assets and interest in property wherever located. The bankruptcy court has worldwide jurisdiction over your property. Certain assets are excluded from your bankruptcy estate by law. These assets are deemed “exempt”. If Florida exemption law applies to your bankruptcy, you have the following exemptions under Florida law.
Verification of Property Values. Only you know the condition and value of your assets. Therefore, your bankruptcy attorney will rely on values you submit on your Questionnaire, and your attorney will not change your values. The Trustee has the authority to send an appraiser to your house to value your property. If the Trustee orders an appraisal of your assets, the appraiser will contact you to make an appointment to come to your house.
Exempt Property in Florida
Homestead Exemption. In a Florida Chapter 7 bankruptcy your homestead is exempt property under Article X, Section 4 of the Florida Constitution. This protection is afforded homestead properties situated on one-half acre or less within a municipality and properties up to 160 acres outside a municipality. There is no dollar limitation. The homestead exemption applies to all Florida residents. The new bankruptcy law does not affect homestead protection for Florida residents in state court proceedings.
Florida residents can protect unlimited equity in your homestead provided you purchased the residence 40 months or more prior to filing bankruptcy. If you purchased your home within 40 months of filng, you can exempt up to $146,450 of equity. Additionally, if you injected excess cash in your home within the 40 months, such as by paying down the mortgage or building a home addition, the amount of investment made within the 40 months will not be exempt even if you purchased the home 40 months prior to filing. The $146.450 homestead exemption limit applies only in bankruptcy cases.
Statutory Exemptions. Chapter 222 of the Florida Statutes includes several categories of exempt property, including: pensions, 401K plans, tax deferred retirement plans, Social Security income, disability income, IRAs, annuities, cash value of life insurance, college investment plans (including 529 Plans), health savings accounts, and hurricane savings accounts.
Automobile Exemption. You are allowed to exempt $1,000 of equity in an automobile. Spouses whose car is titled John Brown and Jane Brown (not John Brown or Jane Brown) may exempt $2,000 of value in that car. Most bankruptcy trustees accept the trade-in or loan value from the yellow NADA book, adjusted for the condition of your car. If the balance of your car loan is greater than the car value (“upside down”) then you have no car equity and your car is protected in bankruptcy so long as you keep your car payments current. You may want to show the bankruptcy trustee photos or repair estimates to substantiate a car value below NADA amounts.
Miscellaneous Personal Property Exemption. Each bankruptcy debtor is allowed to exempt $1,000 ($2,000 for joint filings) of all other personal property including furniture, clothes, tools, and estimated cash on hand. For bankruptcy purposes the value of your personal property is its current fair market value at a public market such as a garage sale or flea market sale.
A new Florida statute effective July 1, 2007, provides a $4,000 “wildcard” personal property exemption to bankruptcy debtors who do not claim a homestead exemption. Joint debtors can claim a $8,000 wildcard exemption. In order to qualifiy for the $4,000 wildcard exemption, you must either not own a home or not claim exempt homestead equity using the Constitutional homestead exemption. You can claim the wildcard if you intend to surrender your home. If you want to stay in your home and do not use the homestead exemption because your home is under water financially, the trustee may still attempt to administer the home as part of the bankruptcy estate.
Objection to Exemptions. The Chapter 7 trustee has 30 days following your meeting to object to your exemptions. If you claim an asset as exempt on your bankruptcy petition and there is no objection within 30 days after your trustee meeting you may assume the asset is exempt and you may do whatever you want with that asset.
Any property which is not exempt under Florida law is included in the bankruptcy estate. The Chapter 7 Trustee may take and sell all non-exempt property and distribute the proceeds to the unsecured creditors. You will have the opportunity to keep your non-exempt property by entering into a “buy-back” agreement with the Trustee. If you execute a buy-back agreement with the Trustee, you will make either a lump sum payment to the Trustee or make monthly installment payments over a period of several months (usually less than 12 months).
Your bankruptcy estate consists of all of your non-exempt property in which you have a legal or equitable interest on the date you file bankruptcy. Assets you acquire after your bankruptcy filing date are not part of the bankruptcy estate even if these assets are non-exempt.