Can You Use Florida Exemptions in Another State?

The general rule is that Florida residents cannot export Florida asset exemptions to other states. Therefore, out of state, or “foreign” judgments pose unique risks to judgment debtors living in Florida.

Even though the judgment debtor lives in Florida, the judgment creditor could start judgment collection proceedings in the foreign state’s court. Most other states have less asset exemptions than those offered by Florida law.

If the foreign court applies the law of the forum state (i.e., the state court that issued the money judgment) then the foreign court will provide the debtor only the asset exemptions available in that state. For example, Florida debtor who is a head of household may not protect wages or commissions rom garnishment initiated in the forum state if that state’s laws do have a comparable exemption.

On the other hand, a Florida debtor can benefit from a foreign forum state applying Florida exemption law even though collection action is initiated in the forum state. An unpublished case, Bank of America vs. National Financial Services (2016 WL 11735382), provided a path to protection of assets in foreign collections using Florida exemptions.

In this case, a national bank filed a writ of garnishment in Texas directed at the Florida debtor’s bank accounts held at a Florida branch of the same bank. The debtor was married, but his accounts were titled as joint tenants with survivorship rather than as tenants by entireties (exempt).

Under Texas law, a writ of garnishment would permit the creditor to seize the entire account notwithstanding the non-debtor’s spouse’s interest in the joint account. Texas is a community property state, whereas Florida recognizes separate property of husband and wife. Florida law permits the garnishing creditor to seize only the debtor’s interest in the account, which is presumed to be 50% of the total balance.

The question for the court was whether the creditor’s writ of garnishment entitled the creditor to seize the entire account (Texas law) or only half the account balance (Florida law). The court looked to the principals expressed in the Restatement of Conflict of Law. Section 132 of the Restatement (Second) Conflict of Laws states that generally a court applies the law of the forum state to determine if a debtor’s assets are exempt. However, the Restatement further explains that a court should apply the laws of a second state in lieu of the forum state when that second state has a dominant interest in the case.

Because the debtor and family lived in Florida and the creditor bank had many Florida offices this federal court said that Florida law, including the state’s joint property laws, had a dominant interest in what portion of the joint bank accounts were susceptible to creditor garnishment. The court protected the non-debtor spouse’s fifty percent interest in the bank account balance from the Texas garnishment writ.

Florida residents should use the principles in this case and in the Restatement of Conflict of Law
to protect Florida based assets from judgments in foreign courts.