Bankruptcy cases are meant to help individuals and companies receive a
fresh financial start in life. For debtors who do not have many assets
or much income, most debts can be discharged, or wiped out, during a Chapter
When filing a Chapter 7 bankruptcy, a debtor is not allowed to keep all
of his or her property. In exchange for the benefit of wiping out most
of a person’s debt, the debtor has to give up any property that
is not considered “exempt.” These exemptions come from either
state or federal law.
In Florida, state residents who file bankruptcy are required to use the
Florida exemption rules rather than the federal exemption rules. Fortunately,
Florida’s exemptions are very favorable to residents, and often
allow debtors to keep more property than the federal exemptions would allow.
The biggest exemption Floridians can use is the homestead exemption. This
exemption covers all of the value of a person’s home, provided that
that the debtor has lived in the home for 1,215 prior to the bankruptcy
filing. Additionally, the debtor’s homestead must have less than
a half-acre of land inside a city, or less than 160 acres of land in a
rural area. If the debtor’s home does not meet these qualifications,
then the homestead may not be entirely protected.
In addition to the homestead exemption, a debtor’s personal property
is protected up to $1,000. Personal property can include anything from
furniture to clothing to artwork, with the exception of vehicles. While
$1,000 may not seem like a lot of money, personal property is valued at
its actual resale value, not at its purchase price. For example, even
though a debtor may have purchased a bedroom set for $1,000, it is likely
that the debtor could not re-sell that same bedroom set at a garage sale
or yard sale for the same price. After years of use and regular wear and
tear, that same bedroom set may only be worth $200-$300. Likewise, while
clothing may be expensive to purchase initially, most people could not
re-sell their wardrobe for very much money.
Vehicles are not covered by the personal property exemption. Instead, there
is a separate vehicle exemption which protects up to $1,000 in equity.
The vehicle exemption is often the biggest obstacle for debtors who want
to file for a Chapter 7 bankruptcy. For many people, it is difficult to
imagine that they may have to give up their car, especially in areas like
South Florida where there are few options for reliable public transportation.
The vehicle exemption protects equity, not the car’s value. For instance,
if a person purchases a $10,000 car but has an auto loan for $9,500, there
is only $500 in equity in the vehicle. As a result, the $1,000 exemption
would protect the entire car. In contrast, if a person purchased the same
$10,000 car but only has a $6,000 auto loan, then the exemption would
only cover $1,000 of the $4,000 in equity that the debtor owns. If that
debtor wanted to keep his or her vehicle, then the debtor would have to
pay the trustee $3,000 for the amount of equity not covered by the $1,000
There are multiple other types of exemptions that cover certain types of
income and property. In order to know for sure how much of your property
would be protected, it is important to speak with a bankruptcy attorney.
At Loan Lawyers, our attorneys can advise you on the best way to keep
the most of your property during a bankruptcy case as well as your different
options for filing.
To schedule your free appointment, contact our office today by calling
(888) FIGHT-13 (344-4813).