Bankruptcy Law

Understanding the Difference Between Exempt and Non-Exempt Property in Chapter 7 Bankruptcy

Before filing for bankruptcy, many people fear losing their property during the process. Federal bankruptcy laws, as well as Florida bankruptcy laws, allow for certain property to be protected under what are known as bankruptcy exemptions. However, not all property is protected, and it is important for filers to be aware of the difference between exempt and non-exempt property in a bankruptcy case.  

When filing for Chapter 7 bankruptcy, the filer should expect for a significant portion of his or her property to be turned over to the court as part of the “bankruptcy estate.” The bankruptcy trustee will sell this non-exempt property to pay off the debtor’s creditors before a bankruptcy discharge is granted. 

Property that is protected from this liquidation process in a Chapter 7 bankruptcy case is known as exempt property, which means it is “exempt” from being part of the bankruptcy estate. This property, for the most part, covers the filer’s necessities of life, such as the person’s home, car, and other essentials that are needed for living and working. Since the point of bankruptcy is to allow the individual to get back on his or her feet, it would be counterintuitive to take away the items or property that are needed to allow him or her to work and earn an income. Non-exempt property usually covers items that are not considered daily living necessities.  

For example, items that are considered non-exempt include a second car or truck, a second home or vacation property, family heirlooms, and expensive items of personal property. Alternatively, exempt property includes several items, such as motor vehicles up to a specific value, the filer’s residence, pensions, clothing, reasonable household goods and furnishings, jewelry up to a certain amount, tools of the filer’s trade or profession, public benefits or public assistance, and damages awarded for personal injury.  

Florida offers some of the most generous bankruptcy exemptions in the country, including an unlimited amount of equity in the filer’s residence. To be able to use Florida’s exemptions, the filer must have resided in Florida for at least 730 days prior to filing the petition. To be able to claim the unlimited homestead exemption, the person must have owned the residence for at least 1,215 days before filing the petition.   

Florida’s bankruptcy exemptions include the following:  

Personal Property Exemptions: 

  • Personal property up to $1,000. Personal property can include such items as furniture, art, and electronics. (Art. 10 Sec. 4, Fl. Constitution) 
  • Education savings, health savings, and hurricane savings. (Fla. Stat. Ann. § 222.22) 
  • Prescribed health aids. (Fla. Stat. Ann. § 222.25) 
  • Prepaid medical savings account and health savings account deposits (Fla. Stat. Ann. § 222.22(2)) 
  • Tax credits and refunds (Fla. Stat. Ann. § 222.25(3)) 
  • Funeral costs per Florida’s Preneed Funeral Contract Consumer Protection Trust Fund (Fla. Stat. Ann. § 497.456) 
  • Particular partnership property (Fla. Stat. Ann. §§ 620.153, 620.8307) 

Florida Motor Vehicle Exemption: 

  • Bankruptcy filers can exempt up to $1,000 in motor vehicle equity, more if you are married and filing jointly. 

Exemptions for Wages in Florida: 

  • Wages of a head of the family are entirely exempt up to $750 per week, or the greater of 75% or 30 times the federal minimum wage. 

Pensions and retirement funds are exempt in Florida: 

  • ERISA qualified retirement plans and pensions (including 401(k)’s, 403(b)’s, profit sharing and money purchase plans, SEP and SIMPLE IRA’s, and other defined benefit plans) are fully exempt. (11 U.S.C. Section 522; Fla. Stat. Ann. § 222.21.) 
  • IRA’s and Roth IRA’s are exempt up to $1,171,650. (11 U.S.C. Section 522(b)(3)(C)(n).) 
  • Public employee retirement benefits. (Fla. Stat. Ann. §§ 121.131, 121.055(6)(e).) 
  • State and County officers and employees retirement system benefits. (Fla. Stat. Ann. § 122.15.) 
  • Firefighter pensions. (Fla. Stat. Ann. § 175.241.) 
  • Municipal police pensions. (Fla. Stat. Ann. § 185.25.) 
  • Teachers’ retirement benefits. (Fla. Stat. Ann. § 238.15.) 

Alimony and Child Support Exemptions: 

  • Alimony and child support, to the extent reasonably necessary for the support of the debtor (the bankruptcy filer) and any dependent of the Debtor, are exempt. (Fla. Stat. Ann. § 222.201.) 

Exemptions for Insurance Policies and Annuities: 

  • The proceeds of a life insurance policy payable to a specific beneficiary are fully exempt. (Fla. Stat. Ann. § 222.13.) 
  • The cash surrender value of a life insurance policy and the proceeds of an annuity contract are fully exempt. However, annuity proceeds resulting from lottery winnings are not exempt. (Fla. Stat. Ann. § 222.14.) 
  • Disability income benefits are exempt. (Fla. Stat. Ann. § 222.18.) 
  • Fraternal benefit society benefits are exempt. (Fla. Stat. Ann. § 632.619.) 

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at   

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