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Florida Bankruptcy Lawyer: What property can I keep? Part 1

Many clients ask me if they will lose everything when they file bankruptcy. The answer is a resounding NO! It is likely that they will keep most, if not all of their property.

When someone files, an “estate” is created and all property belonging to the debtor becomes property of the estate, which is then administered by the US Trustee. However, certain property is exempt which vests back to the debtor. The one question that seems to be the most important to my clients is whether they will be able to keep their home.

Most States have homestead exemptions and Florida has one of the strongest protections in the country when it comes to protecting the home from creditors. Obviously, if there is a Note and Mortgage on the home, the creditor holding that note owns the home until it is paid for. They have superior rights to the house, should the debtor not adequately protect it, and can foreclose as the home is a secured asset. If the home is current, the homestead in Florida works to protect the home if it sits on 1/2 an acre or less when located in a municipality or 160 acres or less when located elsewhere. If the house is owned by tenancy by the entirety (two people who are married) and only one has a creditor seeking relief against the property, then homestead works to protect the entire property.

The homestead exemption protects unlimited equity in the home so long as the home is owned for at least 40 months prior to filing the bankruptcy. If owned less than that time, then only $137,000.00 per person is protected. In the event the home is not current, people can use the Chapter 13 plan to catch up on the deficiency and still claim the homestead exemption, saving their home from all creditors, including the secured creditor that holds the Note!

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