Florida Homestead Exemption in Bankruptcy: What It Protects

Florida's homestead exemption lets you protect unlimited equity in your primary residence when you file for bankruptcy, as long as you meet the state's residency and ownership requirements. The exemption applies in both Chapter 7 and Chapter 13 bankruptcy, though it works differently in each. Below, you'll find what the exemption covers, how to qualify for it, and how it plays out depending on which chapter you file.

Florida's Homestead Exemption Covers Unlimited Home Equity

Florida bankruptcy exemption laws protect equity in your residence up to an unlimited amount, as long as the property doesn't exceed half an acre within a municipality or 160 acres elsewhere. So in Florida, if you qualify, no matter how much equity you have in your home, you get to keep it if you file for bankruptcy. If you don't meet the ownership timeline described below, a federal cap of $214,000 will limit the amount of home equity you can protect. Most states don't offer an exemption that comes close. (11 U.S.C. § 522(p).)

It’s important to recognize that the homestead exemption only protects your home from unsecured creditors in bankruptcy. Because filing for bankruptcy doesn't erase a mortgage, property tax lien, or HOA lien already attached to your home, you must stay current on those secured debts to keep the property. Those creditors won't lose their lien rights.

Qualifying for the Full Homestead Exemption

You must meet two separate timelines to claim the unlimited homestead exemption. To use Florida's exemptions at all, you must have resided in Florida for at least 730 days, or about two years, before filing. To claim the unlimited amount rather than the federal capped amount, you must also have owned your Florida home for at least 1,215 days, or about 40 months, before filing.

One more wrinkle: if you convert nonexempt assets, like cash, into home equity shortly before filing, a court can reduce your homestead exemption if it finds you did so to hinder, delay, or defraud creditors (11 U.S.C. § 522(o).)

Talk to a local bankruptcy lawyer before using this or any other exemption, and make sure you meet all qualification requirements before you file.

How the Exemption Works in Chapter 7 vs. Chapter 13

In Chapter 7 bankruptcy, the homestead exemption determines whether your home is protected outright. In Chapter 13 bankruptcy, it determines how much you'll pay unsecured creditors. Here's how each plays out.

• Chapter 7. Filing this chapter won't help you if you're behind on your house payment. Chapter 7 will stop a foreclosure temporarily, but to keep your house, you'll have to be current on your payment when you file, and stay current going forward. Otherwise, your lender can take the action your contract and Florida law allow.
• Chapter 13. You keep all of your property, including your home, and repay creditors in part or in full through your repayment plan over three or five years. Your unsecured creditors must receive at least as much as they would have gotten in Chapter 7, and the homestead exemption dictates what that amount would be. In Florida, because qualifying home equity is exempt, your unsecured creditors wouldn't get any equity if you had filed for Chapter 7. So even if you own your home free and clear, your monthly payment won't be affected by your home equity.

Bottom line: if you're weighing Chapter 7 against Chapter 13, your homestead exemption and other exemption laws used to protect property should factor into that decision. A local bankruptcy lawyer can confirm exactly what you qualify for before you file. For more about the property you can protect in bankruptcy, see Florida Bankruptcy Exemptions.