Many homeowners facing bankruptcy wonder if they can protect their home’s equity, which is the value of their property minus the balance of their mortgage. Fortunately, Florida’s homestead exemption exists to protect the equity in your home, and by taking advantage of this exemption, it is possible to protect your nest egg. Below, we’ll discuss more about the importance of the Florida’s homestead exemption in bankruptcy and outline the details homeowners should know.
If your home is worth more than the balance of your mortgage, then you have equity. For example, if you own a home worth $400,000 and you have a $300,000 mortgage on it, you’d then have $100,000 of equity in your home.
Typically, real estate equity is considered to be an asset in bankruptcy, which means that a Chapter 7 trustee can sell your house and use the equity to pay your creditors. However, if you live in that house, and it is located in Florida, the homestead exemption allows you to exempt 100% of your equity and protect it from the bankruptcy trustee. There are very narrow exceptions to this, but you should be sure to cover any possible exceptions with us. Like Chapter 7, a chapter 13 bankruptcy trustee cannot require you to pay the equity in your Florida home to creditors.
How much equity you are allowed to exempt depends on what state you live in. Both federal and state homestead exemptions exist, and some states allow you to choose between the exemptions systems—picking the one most beneficial to you. Other states have no exemption at all, in which case homeowners must use the federal homestead exemption.
Even though Florida has an unlimited bankruptcy homestead exemption amount, there are some important limitations. For instance, there are limits on the property’s size, and minimum requirements for how long you have to have owned the property. Also, for married couples, the exemption may be doubled. Because of the number of possible factors, it is best to consult an experienced attorney who can guide you to the best possible financial outcome.
The process of bankruptcy can be confusing and, with important assets such as your home at stake, should not be attempted without guidance from an experienced attorney. At Parker & DuFresne, our goal is to get clients back on the road to financial stability as soon as possible. We specialize in bankruptcy law and can carefully and thoroughly review your Florida homestead exemption with you. Contact us today to schedule your consultation.
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