Homestead and Bankruptcy in Florida

Florida’s constitutional homestead exemption is the strongest in the country in state court proceedings. The exemption protects unlimited equity in a debtor’s primary residence, applies immediately upon occupancy with intent to remain permanently, and cannot be defeated by a creditor’s claim that the debtor converted non-exempt assets into the homestead to avoid collection. In bankruptcy, however, federal law imposes several limitations on the Florida homestead exemption that do not exist in state court. These limitations make bankruptcy a less attractive option for many Florida debtors who would otherwise enjoy complete homestead protection outside of the bankruptcy system.

The 730-Day Domicile Rule

Under 11 U.S.C. § 522(b)(3)(A), a debtor filing bankruptcy may claim the exemptions of the state in which the debtor has been domiciled for the 730 days (approximately two years) immediately preceding the filing of the bankruptcy petition. If the debtor has not been domiciled in a single state for the full 730-day period, the debtor must use the exemptions of the state in which the debtor was domiciled for the greater portion of the 180 days immediately preceding the 730-day period.

This rule means that a person who moves to Florida and files bankruptcy within two years cannot claim Florida’s unlimited homestead exemption. The debtor must instead use the exemptions of the prior state of domicile, which in most cases will be far less generous. A debtor moving from New Jersey, for example, would have no homestead exemption at all under New Jersey law, despite now owning a home in Florida. If the domicile requirement renders the debtor ineligible for any state’s exemptions, the debtor may fall back on the federal bankruptcy exemptions under § 522(d), which include a homestead exemption of only $31,575 (effective April 1, 2025).

The practical consequence is significant for asset protection planning. A person who relocates to Florida specifically to take advantage of the homestead exemption must reside in Florida for at least 730 days before filing bankruptcy. In state court collection proceedings, by contrast, Florida’s homestead exemption is available immediately upon establishing residency and occupancy with the intent to make Florida one’s permanent home.

The 1,215-Day Homestead Cap

Even after satisfying the 730-day domicile requirement, a Florida debtor’s homestead exemption in bankruptcy may still be limited. Section 522(p) provides that a debtor may not exempt any interest in homestead property that was acquired during the 1,215 days (approximately three years and four months) preceding the bankruptcy filing to the extent that the interest exceeds $214,000 in value (as adjusted effective April 1, 2025; the statutory base amount was $125,000 when BAPCPA was enacted in 2005).

This cap applies to the equity interest acquired during the 1,215-day window, not to the total value of the homestead. If a debtor purchased a Florida home five years before filing bankruptcy, the entire equity is exempt regardless of amount because the interest was acquired outside the 1,215-day period. If the debtor purchased the home two years before filing, only $214,000 of equity is exempt; any excess equity is available to the bankruptcy trustee. Joint debtors filing together may each claim the cap, potentially protecting up to $428,000 of equity in a jointly owned homestead.

The statute contains an important safe harbor: the cap does not apply to equity that was transferred from a debtor’s previous principal residence if that prior residence was acquired before the start of the 1,215-day period and was located in the same state. A Florida debtor who sells one Florida home and purchases another Florida home within the 1,215-day window can carry the equity from the prior home into the new home without triggering the cap, provided the prior home was acquired before the 1,215-day period began.

The Ten-Year Fraudulent Conversion Reduction

Section 522(o) provides that the value of a debtor’s homestead exemption shall be reduced to the extent the value is attributable to any property that the debtor disposed of during the ten years preceding the bankruptcy filing with the intent to hinder, delay, or defraud a creditor, if that property could not itself have been exempted. In plain terms, if a debtor converts non-exempt assets into homestead equity with the intent to defraud creditors within ten years of filing bankruptcy, the bankruptcy trustee can reduce the homestead exemption by the amount of the fraudulent conversion.

This provision represents the most significant departure from Florida state court law. Under the Florida Supreme Court’s decision in Havoco of America v. Hill, 790 So.2d 1018 (Fla. 2001), converting non-exempt assets into a homestead to defeat creditors does not forfeit the constitutional exemption in state court proceedings, because fraudulent conversion is not one of the three enumerated exceptions in Article X, Section 4. Federal bankruptcy law effectively overrides this protection by permitting the trustee to claw back the fraudulently converted portion of the homestead equity.

The ten-year lookback is substantially longer than the typical fraudulent transfer statute of limitations. A debtor who moved $500,000 of non-exempt investment funds into a homestead eight years before filing bankruptcy, with the intent to shelter the money from creditors, could face a $500,000 reduction in the homestead exemption even though the transfer occurred nearly a decade earlier.

The Felony and Securities Fraud Cap

Section 522(q) imposes a separate $214,000 cap (same adjusted amount as § 522(p), effective April 1, 2025) on the homestead exemption if the debtor has been convicted of a felony demonstrating that the filing of the case was an abuse of the provisions of the Bankruptcy Code, or if the debtor owes a debt arising from certain enumerated types of misconduct. These include violations of federal or state securities laws, civil RICO violations, crimes or intentional torts causing serious physical injury or death, and certain other categories of wrongdoing.

Unlike § 522(p), which expires once the debtor has owned the homestead for more than 1,215 days, § 522(q) has no temporal limitation. A debtor convicted of securities fraud twenty years before filing bankruptcy may still be subject to the $214,000 cap on the homestead exemption if the debtor owes a debt arising from that conduct.

Discharge Denial Under Section 727

Beyond the exemption limitations, bankruptcy law gives the trustee an additional weapon against debtors who convert non-exempt assets into a homestead shortly before filing. Under 11 U.S.C. § 727, a bankruptcy court may deny the debtor a discharge of unsecured debts entirely if the debtor transferred, removed, destroyed, or concealed property within one year before filing with the intent to hinder, delay, or defraud a creditor or the trustee.

The interaction between homestead protection and discharge denial creates a paradoxical result. A debtor who converts non-exempt assets into a homestead shortly before filing bankruptcy may succeed in retaining the homestead itself (assuming the exemption limitations do not apply), but the court may deny the debtor’s discharge, leaving all unsecured debts intact. The debtor keeps the house but gets no relief from the debts that prompted the bankruptcy filing.

A federal appellate case illustrated this dynamic clearly. A debtor who used a personal injury settlement to pay down her homestead mortgage, specifically to shield the funds from a credit card creditor, then filed bankruptcy a few months later. The court found no basis for an equitable lien on the homestead because the funds were not obtained through fraud or wrongdoing. However, the court denied the debtor’s discharge under § 727, concluding that the conversion of funds into the homestead on the eve of bankruptcy demonstrated the requisite intent to defraud creditors.

Why State Court Is Often Preferable

These federal limitations explain why many Florida debtors with significant homestead equity are better served by defending against creditors in state court rather than filing for bankruptcy. In state court, the homestead exemption is immediate, unlimited in value, and immune from fraudulent conversion challenges under Havoco. The homestead cannot be waived by any clause in a loan agreement or contract, and the only exceptions are those enumerated in the Constitution itself: mortgages, tax liens, and mechanics’ liens.

A bankruptcy trustee, by contrast, is a more aggressive and sophisticated collector than most judgment creditors. The trustee has jurisdiction over all of the debtor’s assets wherever located in the United States, can challenge exemptions that would be unassailable in state court, and can pursue fraudulent transfers under both federal and state law with a longer lookback period than most state statutes provide. The trustee also works on a contingency fee, taking a percentage of the assets recovered for the estate, which creates a strong financial incentive to challenge every available exemption.

For Florida residents whose primary asset is a homestead with substantial equity, the risk-reward calculus of bankruptcy often tilts against filing. The debtor may retain more assets and achieve a more favorable resolution by defending against creditors through state court proceedings, where Florida’s constitutional protections apply at their maximum strength and without the federal overlay that bankruptcy imposes.