Key Florida Chapter 7 Exemptions: Home & Retirement Savings
Exemptions in bankruptcies refer to protected assets that cannot be sold to satisfy creditor claims. State bankruptcy exemptions take precedence over Federal exemptions, resulting in wide state-to-state variations.
Florida, An Advantageous Bankruptcy State
In Florida, the two key Chapter 7 exemptions are a debtor’s primary (homestead) residence and retirement assets. Because these two assets often comprise most of a debtor’s net worth, Florida is considered an advantageous place to file a Chapter 7 bankruptcy.
However, Florida only exempts $4,000 in personal property (or $1,000, if claiming a primary homestead residence) and $1,000 per vehicle. That means that any amount of personal property – cars, boats, furniture, jewelry and so on – and vehicle equity in excess of these limits gives the debtor two choices:
- To “buy back” the amount of property in excess of the exemption limits from the trustee (by presenting a bank cheque made out to the trustee); or
- To choose to forfeit to the trustee the personal property in excess of the exemption limits
Bankruptcy Trustee Incentives
Bankruptcy trustees are paid a nominal $60 fee to oversee a Chapter 7 bankruptcy. So where’s the incentive to do the work they do? They can keep a percentage of whatever they recover for the creditors. That can motivate them, especially on large bankruptcies, to get as much as possible for creditors from property in excess of exemption limits.
Advance Bankruptcy Planning Is Important
When considering a Chapter 7 bankruptcy, it’s critically important for debtors to do advance planning ahead of the initial filing.
Thinking through their exemptions can help them position their personal property more advantageously. At the same time, they should seek legal counsel to ensure they do not jeopardize their Chapter 7 bankruptcy’s outcome. That’s because the trustee can go back months and sometimes years to determine if exempt property is non-exempt.
Tags: advance bankruptcy planning, Bankruptcy in Florida, Chapter 7 bankruptcy, chapter 7 bankruptcy in florida, exemptions in bankruptcies
Posted in What Does Bankruptcy Mean To You