How the Florida Homestead Exemption Works in Bankruptcy

The Florida Constitution protects Florida homestead properties from judgment creditors. A creditor’s money judgment is not an enforceable lien on a Florida homestead. A creditor may not foreclose its judgment against a homestead to collect its judgment.

There are lot size limits on homestead property protection. Your homestead property must be 1/2 or less if it’s located in the city. It must be 160 acres or less if it’s located in an unincorporated county.

There is no value ceiling on the homestead exemption. Homestead properties of unlimited value are exempt from creditors in state court collection.

The Florida Supreme Court has held that homestead properties are exempt from fraudulent conveyance allegations. The transfer of money into a Florida homestead cannot be attacked as a fraudulent conveyance so long as the money used to purchase or improve the home was not obtained initially through fraudulent conduct.

Florida Homestead Exemption in Bankruptcy

Our clients are often surprised to find that their homestead protection is diminished in bankruptcy court.

Bankruptcies are governed by federal law. Florida bankruptcy generally incorporates state court exemptions, but there are federal bankruptcy laws pertaining to the homestead exemption that preempt Florida’s broad Constitutional homestead rules.

Here are the two main differences between homestead exemptions in bankruptcy court and state court:

1. Residency: In state court, your homestead protection is immediate once you demonstrate your intent to make your Florida home your permanent residence. In contrast, the bankruptcy law caps the homestead exemption at a specific amount (adjusted periodically) unless you have resided in the house for at least three years and four months before filing bankruptcy.
2. Fraudulent Conversions: Your transfer of cash into their homestead within ten years of filing bankruptcy may be challenged by the bankruptcy trustee as a fraudulent conversion if the transfer was intended to defraud creditors. Fraudulent conversions to a Florida homestead may cost the debtor a bankruptcy discharge.

We advise most of our clients facing civil judgments to avoid bankruptcy court.

The bankruptcy court’s diminished Florida homestead exemption is a big reason we warn clients about filing bankruptcy.

Generally, a bankruptcy trustee’s tools to attack your homestead and other assets in bankruptcy are more powerful than a judgment creditor’s remedies in state court.