I have done a fair amount of research on asset protection in the Sunshine State and wanted to share what I have learned. It may surprise you, or even shock you.
That said, it is NOT legal advice of course. Consult an attorney and get verification.
As stated on the stickies above, no ch 7 should ever be an asset case, but sometimes it can happen.
Florida has one of the strongest homestead exemptions in the nation, if not THE strongest. Florida homeowners can exempt the ENTIRE home to an unlimited amount. If you are fortunate enough to own a 50 million dollar waterfront estate, you would be able to keep it in a chapter 7 bankruptcy. In fact, you would be able to add a 30 million dollar expansion the day BEFORE filing and the courts would not care.
You may also reap the benefits of this if you move to Florida and then file bankruptcy. Even if you have judgements in other states or ongoing litigation elsewhere. This gets trickier and needs far more study than can be explained in this forum, but is possible, as long as no orders to retain assets have been entered. Definitely consult an attorney on these matters.
But if you had a 50 million dollar estate, you wouldn't need to be reading this post.
A simplified explanation, for the rest of us:
Florida law, upheld by the state Supreme Court, allows you to convert ANY non-exempt asset into your homestead at any time prior to filing. EVEN THE DAY BEFORE.
The assets converted can NOT be from ill-gotten gains, such as fraud, criminal activities including securites violations, murder-for-insurance schemes, etc.
If however, you, like the majority of people, have simply acquired a fair amount of "stuff" over the years, you probably have things like jewellery, cars, maybe artwork, non-exempt cash or accounts of stocks and bonds. All of these may be sold and the money may be used to pay down your mortgage or even to purchase a new home, whether it is a $40,000 home ( I plan to do this in the next month or so), or a gazillion dollar mansion.
If your home is already paid off, you may improve it with new outbuildings, renovations, etc. ANY non-exempt asset may be liquidated and used for this purpose. I cannot stress this enough. You can sell that Ferarri collection and install a 4 million gallon Koi pond complete with pink plastic flamingos!
The important aspect is that NO look-back period applies. If the proceeds went into your home, they are "home-free". Keep receipts of course!
Now, this will NOT make an existing mortgage disappear (unless the assets sold allow you to pay off the note). You still have to pay regardless, so this is of limited use to those who are surrendering their home or may do so in the future. Additionally, if you owe more than the house is worth, you have a decision to make. Maybe adding equity will benefit you in the long-term and maybe not. Only you can decide.
see: http://www.alperlaw.com/constitutional_protection.html
for an attorney's thoughts on the matter.
For those who are outside of Florida and would consider moving here, there is this:
Florida does not have a definitive standard for what makes a Florida resident. There is no number of days you must be here to claim residency. The determination is made, for BK purposes, by looking at several factors, including a declaration made to the Clerk of the Circuit Court, your mailing address, driver's license, voter registration and other things.
If you have sold a home in another state and this is the only place you own, along with the above, you are on the right path.
This clashes directly with other BK statutes, however, which require a 2 year term of residency. I do not know how the courts in Florida would view this conundrum, and wouldn't want to be the first to find out, honestly. But if you're up against a wall, you should look into this with your Florida attorney.
Now, Florida does not extend unlimited homestead rights to newcomers. BUT, it does offer this:
Any Florida resident, regardless of length of residency, can claim a homestead exemption of $137,000. That number doubles for married couples.
Once you have lived here for 40 months, the unlimited homestead exemption kicks in and you can safely purchase Key West as your new estate.
It even applies to non-exempt tax refunds! In the following case, a couple used a non-exempt tax refund of THREE HUNDRED THOUSAND DOLLARS as a down-payment on a home immediately prior to declaring bankruptcy. The trustee objected, of course, but lost. They kept the home (and the money).
The court ruled that, even though the couple pretty much admitted to defrauding creditors, the money was in their homestead, safely protected by Florida's constitution. Therefore, the creditors could not touch it. Incredible. You could walk into court and say, "Yea, I sold my Monet collection so it wouldn't end up hanging in the lobby of Citibank. Then I paid off my house." And it wouldn't matter. Of course, I would never be that blunt, but it would be fun, no?
There are many intricacies, many more than can be covered in a post of any length, and not all situations will be the same of course, so consult attorneys, accountants, and so on.
I thought it was important to add this to the Forum's excellent collection of wisdom, for other Florida residents and those who come in the future.
That said, it is NOT legal advice of course. Consult an attorney and get verification.
As stated on the stickies above, no ch 7 should ever be an asset case, but sometimes it can happen.
Florida has one of the strongest homestead exemptions in the nation, if not THE strongest. Florida homeowners can exempt the ENTIRE home to an unlimited amount. If you are fortunate enough to own a 50 million dollar waterfront estate, you would be able to keep it in a chapter 7 bankruptcy. In fact, you would be able to add a 30 million dollar expansion the day BEFORE filing and the courts would not care.
You may also reap the benefits of this if you move to Florida and then file bankruptcy. Even if you have judgements in other states or ongoing litigation elsewhere. This gets trickier and needs far more study than can be explained in this forum, but is possible, as long as no orders to retain assets have been entered. Definitely consult an attorney on these matters.
But if you had a 50 million dollar estate, you wouldn't need to be reading this post.
A simplified explanation, for the rest of us:
Florida law, upheld by the state Supreme Court, allows you to convert ANY non-exempt asset into your homestead at any time prior to filing. EVEN THE DAY BEFORE.
The assets converted can NOT be from ill-gotten gains, such as fraud, criminal activities including securites violations, murder-for-insurance schemes, etc.
If however, you, like the majority of people, have simply acquired a fair amount of "stuff" over the years, you probably have things like jewellery, cars, maybe artwork, non-exempt cash or accounts of stocks and bonds. All of these may be sold and the money may be used to pay down your mortgage or even to purchase a new home, whether it is a $40,000 home ( I plan to do this in the next month or so), or a gazillion dollar mansion.
If your home is already paid off, you may improve it with new outbuildings, renovations, etc. ANY non-exempt asset may be liquidated and used for this purpose. I cannot stress this enough. You can sell that Ferarri collection and install a 4 million gallon Koi pond complete with pink plastic flamingos!
The important aspect is that NO look-back period applies. If the proceeds went into your home, they are "home-free". Keep receipts of course!
Now, this will NOT make an existing mortgage disappear (unless the assets sold allow you to pay off the note). You still have to pay regardless, so this is of limited use to those who are surrendering their home or may do so in the future. Additionally, if you owe more than the house is worth, you have a decision to make. Maybe adding equity will benefit you in the long-term and maybe not. Only you can decide.
see: http://www.alperlaw.com/constitutional_protection.html
for an attorney's thoughts on the matter.
For those who are outside of Florida and would consider moving here, there is this:
Florida does not have a definitive standard for what makes a Florida resident. There is no number of days you must be here to claim residency. The determination is made, for BK purposes, by looking at several factors, including a declaration made to the Clerk of the Circuit Court, your mailing address, driver's license, voter registration and other things.
If you have sold a home in another state and this is the only place you own, along with the above, you are on the right path.
This clashes directly with other BK statutes, however, which require a 2 year term of residency. I do not know how the courts in Florida would view this conundrum, and wouldn't want to be the first to find out, honestly. But if you're up against a wall, you should look into this with your Florida attorney.
Now, Florida does not extend unlimited homestead rights to newcomers. BUT, it does offer this:
Any Florida resident, regardless of length of residency, can claim a homestead exemption of $137,000. That number doubles for married couples.
Once you have lived here for 40 months, the unlimited homestead exemption kicks in and you can safely purchase Key West as your new estate.
It even applies to non-exempt tax refunds! In the following case, a couple used a non-exempt tax refund of THREE HUNDRED THOUSAND DOLLARS as a down-payment on a home immediately prior to declaring bankruptcy. The trustee objected, of course, but lost. They kept the home (and the money).
The court ruled that, even though the couple pretty much admitted to defrauding creditors, the money was in their homestead, safely protected by Florida's constitution. Therefore, the creditors could not touch it. Incredible. You could walk into court and say, "Yea, I sold my Monet collection so it wouldn't end up hanging in the lobby of Citibank. Then I paid off my house." And it wouldn't matter. Of course, I would never be that blunt, but it would be fun, no?
There are many intricacies, many more than can be covered in a post of any length, and not all situations will be the same of course, so consult attorneys, accountants, and so on.
I thought it was important to add this to the Forum's excellent collection of wisdom, for other Florida residents and those who come in the future.
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