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What Are Exemptions In Bankruptcy?


Bankruptcy exemptions allow those in Chapter 7 to protect some of their most prized assets from liquidation. Remember, in Chapter 7 bankruptcy your assets are liquidated to repay creditors. On the other hand, Chapter 7 bankruptcy requires that you pass a means test to show that you don’t have enough money to pay your debts. That usually means that someone filing under Chapter 7 doesn’t have a lot of assets worth protecting. However, they may have a few prized possessions or want to protect the equity in their home, vehicle, or retirement account. That can be done using Chapter 7’s many exemptions.

Florida’s bankruptcy protections 

Florida protects the bankruptcy system by preventing individuals from moving to the state simply to file for bankruptcy. You can file for bankruptcy after the greater part of 180 days, or 91 days  of living within the state, but you can’t use Florida’s exemptions until 730 days before filing the petition. If you haven’t lived in Florida for 730 days, then you can only use your former state’s bankruptcy code, which means either the former state’s exemptions or federal exemptions.

Florida bankruptcy exemptions 

The federal government has its own bankruptcy exemptions, and some states allow you to choose. However, Florida does not allow individuals or couples to choose their own exemptions. Florida has not “opted in” to the federal exemptions. Debtors must use the  state’s own exemptions. This is unlike Texas where you can choose, but in Texas the state exemptions are more generous than the federal exemptions. The major advantage to the Florida exemptions is the homestead exemption which is quite generous.

As stated earlier, exemptions allow you to protect property in a Chapter 7 bankruptcy. Since your excess assets will be liquidated to repay creditors, you will have to turn those assets over to the bankruptcy court. To be clear, turning over assets generally means working out a compromise with the bankruptcy trustee to pay your creditors the value of assets not exempt or protected.

Among the major benefits of Florida’s system is the ability to protect an unlimited amount of homestead equity While there are some exceptions, in general,  you can protect all of the equity in your home so long as it does not exceed a half-acre within a municipality or 160 acres outside the municipality which is usually rural land.. Also, the property must have been acquired  for at least 1,215 days.

Alternatively, however, you can only protect $1,000 in “personal property” if you use the homestead exemption. If you don’t use the homestead exemption, you can protect up to and additional  $4,000 in personal property for an  individual and the same amount for a joint debtor.

Talk to a Jacksonville, FL Bankruptcy Attorney Today 

The Law Offices of Carol M. Galloway, P.A. can help you determine if bankruptcy is the right choice for you, which exemptions you should use, and whether or not you can file in Florida. Call our Jacksonville bankruptcy attorney today to schedule an initial consultation and learn more about how we can help.

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