Bankruptcy Filings, Bankruptcy Law, Consumer Bankruptcy

Protecting Your Assets During Bankruptcy

People often fear losing everything they own when filing for personal bankruptcy. The good news is the U.S. Bankruptcy Code and Florida bankruptcy laws protect a great deal of a consumer’s assets and property, if used appropriately.

The State of Florida has some of the most generous bankruptcy exemptions in the country. For these exemptions to apply, the consumer must have lived in the state for at least two years before filing. Otherwise, federal exemptions apply.

How bankruptcy exemptions apply depends on the type of bankruptcy case being filed. In a Chapter 7 case, the bankruptcy trustee sells the filer’s nonexempt property, using the proceeds to pay off qualified debts and discharging the remaining debts at the end of the case.

In some cases, if you are not able to exempt an asset fully, the trustee may abandon it because the value is not significantly more than the exemption amount.  Keep in mind, it is expensive to conduct a sale for an asset, and it is only worth selling the asset if there is money to pay back your creditors. Usually, goods and clothing are exempt unless they are worth a significant amount of money. In certain states, like Florida, there is an unlimited homestead exemption, which allows you to keep your home in its entirety.

Here is a list of the most common bankruptcy exemptions in Florida.

Homestead Exemption

The homestead exemption allows the filer to keep equity he or she has in the home. In Florida, the amount that is allowed to be exempted is unlimited, meaning the entire value of the house is protected. The filer can keep his or her home after the bankruptcy, so long as he or she can keep up on mortgage payments and can pay off any past due payments. Also, to use the unlimited exemption offered by Florida bankruptcy law, the consumer must have owned the home for at least 1,215 days prior to filing, which comes out to roughly three years and four months.

Wage Exemption

Money the filer earns through his or her paycheck can also be exempted up to a certain amount. The law allows wages of the head of household to be fully exempt up to $750 per week. This exemption applies to both paid and unpaid wages. Any wages deposited into the bank account for up to six months prior to filing can also be protected. Other members of the household can protect up to 75 percent (75%) of their wages or 30 times the federal minimum wage, whichever is higher.

Personal Property Exemptions

Personal property can also be protected to a certain amount. Florida’s bankruptcy exemptions protect up to $1,000 in personal property or $4,000 in personal property if the filer does not use the homestead exemption. This exemption covers art, electronics, jewelry, and furniture. Money in a health savings account and education savings account is also protected, as are prescribed home health aides.

Wildcard Exemption

If the filer does not use the homestead exemption, he or she can protect other property via the wildcard exemption. This exemption can be used on up to $4,000 of personal property or $8,000 if the consumer files his or her taxes jointly with his or her spouse. The wildcard exemption can also be used towards the consumer’s home if he or she owes more than the house is worth, to protect that amount of value in the residence.

Motor Vehicle Exemption

The law allows the filer to retain a certain amount of equity in the car he or she drives. Florida allows the filer to exempt up to $1,000 of the equity he or she has in a car, if the filer has any equity at all in the vehicle.

Retirement Savings & Pension Exemptions

Florida bankruptcy law will also protect certain types of retirement plans and pensions, including the following:

  • ERISA-qualified retirement plans, including 401(k)’s, 403(b)’s, IRAs, Roth IRAs, money purchase plans, and profit-sharing plans,
  • Public employee retirement benefits,
  • Firefighter and police pensions, and
  • Teachers’ retirement plans.

Insurance and Benefits Exemptions

Florida bankruptcy filers may also protect the following financial assets through bankruptcy exemptions:

  • Proceeds of a life insurance policy that are payable to a specified beneficiary,
  • Disability income benefits,
  • The cash surrender value on a life insurance policy,
  • Fraternal society benefits, and
  • Proceeds from an annuity contract, with the exception of annuities set up for lottery winners.

Public Benefits Exemption

Additionally, other benefits the consumer receives may also be exempt including the following:

  • Social Security benefits,
  • Veterans’ benefits,
  • Workers’ compensation and/or unemployment benefits,
  • Local public assistance benefits, and
  • Money received as crime victim’s compensation benefits.

Child Support and Alimony Exemptions

Money the consumer receives from an alimony or child support order are exempt from being seized in a bankruptcy so long as they are reasonably necessary the support of the filer and his or her child, in cases of child support.

To ensure that the consumer is properly using these bankruptcy exemptions to protect his or her property, a qualified bankruptcy attorney should always be consulted.

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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 www.miamibankruptcy.com.

 

Bankruptcy Law

How Are Assets & Financial Accounts Protected in Bankruptcy?

When filing for bankruptcy, a common concern individuals have is how bankruptcy will affect their assets. If you are filing for Chapter 7 bankruptcy in Florida, you can use Florida bankruptcy exemptions to protect your property.  In addition, residents are provided unlimited exemptions for homestead, annuities, and the cash surrender value of a life insurance policy.

Florida has one of the most generous homestead exemptions in the country. To use these exemptions, you must have resided in Florida for at least 730 days before filing your bankruptcy petition. To claim the full value of the homestead exemption in Florida, you must have owned the property for at least 1,215 days before the bankruptcy filing.

Many people are misled to believe that bankruptcy can only make problems worse by causing them to lose their home, vehicle or their ability to ever take out credit, again. This could not be further from the truth.

In fact, those filing for Chapter 7 or Chapter 13 can keep almost everything.  Depending on your specific case, Florida bankruptcy laws allow you to keep the following:

  • Homes
  • Cars
  • Retirement accounts
  • Pensions
  • Wages
  • Personal property
  • Savings
  • Veteran’s or Worker’s Comp. Benefits

Type of Bankruptcy Filed

One deciding factor lies in what type of bankruptcy is being filed. Under a Chapter 7 bankruptcy case, the filer turns over assets that are not otherwise protected under Florida’s bankruptcy exemptions to the court where they are liquidated and used to pay off that person’s creditors. Depending on what falls under Florida bankruptcy exemptions, if the filer has a great deal of assets, this bankruptcy may not be ideal. With a Chapter 13 bankruptcy, the filer’s assets are not liquidated. Instead, an affordable repayment plan is prepared by the court allowing the consumer to pay down his or her debts over three to five years.

Bank Accounts

In a Chapter 7 bankruptcy case, the average filer’s bank accounts are not affected. The exceptions to this, include:

  • When the filer’s bank or credit union account balances exceed the allowed exemption amount;
  • When the filer owes money to the bank or credit union where the funds are deposited;
  • When specific institutions implement policies to freeze the bank accounts.

The protections of the bankruptcy automatic stay, which go into effect immediately upon filing for bankruptcy halt any collection activity, garnishment, and lawsuits against you.

401(k) Accounts

If the filer has money in a 401(k) account through his or her employer, this money is considered safe for the most part. Under Florida bankruptcy law, a filer’s retirement accounts are protected so long as the 401(k) plan is qualified under the Employee Retirement Income Security Act (ERISA). Under 11 U.S.C. Section 522; Fla. Stat. Ann. § 222.21, ERISA qualified retirement plans are fully exempt, including 401(k)’s, 403(b)’s, profit sharing and money purchase plans. However, make sure the account is ERISA protected before making any assumptions.

Traditional or Roth IRA Plans

If the filer has an IRA, including a Roth IRA, this type of plan is treated differently than a 401(k) that is ERISA protected, meaning these accounts are more vulnerable in a Chapter 7 bankruptcy case. Further, any funds that are withdrawn from a retirement account are not considered protected in a Chapter 7 bankruptcy case and are considered fair game for creditors.

Other Retirement or Pension Benefits

Other financial accounts are protected under Florida bankruptcy law, including public employee retirement benefits, municipal police pensions, and firefighter pensions. Teacher retirement pensions, as well as state and county retirement benefits, are similarly protected under Florida bankruptcy exemptions.

Annuity Income

If the filer receives money through an annuity, the rules are a little different. If the annuity was funded through an ERISA-protected IRA or other qualifying account, the filer should be able to exempt up to $1,362,800 of its value, up until 2022 when it is subject to change. If the annuity is also tied to a condition of illness, disability or length of service, the money from the annuity may also be exempt. Because annuities tend to be a little more complicated, it is recommended you consult with a bankruptcy attorney regarding protecting annuity funds.

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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 www.miamibankruptcy.com.

Related Resource: https://www.nolo.com/legal-encyclopedia/florida-bankruptcy-exemptions-property-assets-bankruptcy.html