Can You Keep Your House
When Filing Bankruptcy in Florida?
How Florida Bankruptcy and Homestead Protections May Affect Your Home
For many homeowners, the fear of losing their house is one of the biggest concerns when considering bankruptcy. However, filing bankruptcy in Florida does not automatically mean that your home will be taken or sold.
Florida provides significant homestead protections, but several factors can affect whether your home and its equity are protected. The type of bankruptcy you file, the amount of equity in the property, how long you have owned the home, residency requirements, mortgages and other liens can all play a role.
Therefore, before deciding that bankruptcy will cost you your home, it is important to understand how Florida’s homestead exemption works and how your house may be treated under Chapter 7 or Chapter 13 bankruptcy.
Can You File Bankruptcy and Keep Your House in Florida?
In many cases, yes.
A person may be able to file bankruptcy in Florida and continue owning and living in their home. However, the answer depends on the individual’s circumstances and the protections available for the property.
One of the most important factors is equity.
Home equity is generally the difference between the current value of the property and the amount owed on mortgages and other liens secured by the property.
For example, a homeowner with a property worth $350,000 and a $300,000 mortgage has approximately $50,000 in equity before considering other liens or applicable costs.
Whether that equity is protected during bankruptcy requires an analysis of the exemptions available to the homeowner.
How Does the Florida Homestead Exemption Work in Bankruptcy?
Florida is known for providing substantial protection to qualifying homestead property.
The Florida homestead exemption can protect equity in a person’s primary residence when the applicable legal requirements are satisfied. Unlike some other types of bankruptcy exemptions that are based primarily on a specific dollar amount, Florida’s homestead protection involves several additional requirements.
These may include:
- Whether the property is your primary residence
- How long you have owned the property
- How long you have been a Florida resident
- The property’s location and acreage
- Applicable federal bankruptcy limitations
- Other circumstances surrounding ownership of the property
As a result, simply owning a Florida home does not automatically establish that all of its equity will be protected in bankruptcy.
Does the Amount of Equity in Your Home Matter?
Yes. Equity can be one of the most important considerations when evaluating a home during bankruptcy.
Someone who recently purchased a home with a large mortgage may have relatively little equity. Another homeowner who has owned a property for decades or paid off the mortgage may have substantial equity.
The amount of equity matters because bankruptcy exemptions protect your interest in the property, not merely the physical house itself.
This is why determining the approximate market value of the home, outstanding mortgage balances, liens and available exemptions should be part of the bankruptcy analysis before filing.
Visit the:
Florida Bankruptcy Exemptions Chart
Chapter 7 bankruptcy is generally designed to discharge qualifying unsecured debts. In exchange, non-exempt property may potentially be administered by the Chapter 7 trustee for the benefit of creditors.
However, property that is properly protected by an applicable bankruptcy exemption generally does not become available for liquidation simply because a Chapter 7 case was filed.
For Florida homeowners, that makes the homestead exemption particularly important.
If the home’s equity is protected and the homeowner remains current on applicable obligations, it may be possible to keep the house during and after Chapter 7 bankruptcy.
However, bankruptcy does not eliminate a valid mortgage lien simply because the underlying personal obligation may be affected. Homeowners who want to retain their property generally must continue addressing their mortgage obligations.
Rather than potentially liquidating non-exempt property, Chapter 13 generally allows debtors to retain their assets while completing a court-approved repayment plan.
For homeowners, Chapter 13 can sometimes provide additional options when they are behind on mortgage payments.
Depending on the circumstances, past-due mortgage payments may be addressed through the Chapter 13 plan while the homeowner continues making required ongoing payments.
However, home equity and bankruptcy exemptions still matter. The value of non-exempt property may influence how much must be paid to unsecured creditors through the Chapter 13 plan.
Falling behind on mortgage payments does not necessarily mean bankruptcy cannot help.
The options available may depend heavily on whether Chapter 7 or Chapter 13 is being considered.
Chapter 7 may temporarily stop certain collection activity through the automatic stay, but it generally does not provide a long-term mechanism for curing substantial mortgage arrears.
Chapter 13, on the other hand, may allow qualifying homeowners to address past-due mortgage payments over the life of a repayment plan while maintaining ongoing payments.
The appropriate strategy depends on the homeowner’s income, debts, equity, mortgage status and long-term goal for the property.
Filing a bankruptcy case generally triggers the automatic stay, which can temporarily stop many collection activities, including certain foreclosure actions.
However, the automatic stay should not be confused with permanently eliminating a mortgage or guaranteeing that a homeowner can remain in the property.
A mortgage lender may seek relief from the automatic stay under certain circumstances, and the long-term outcome depends on the type of bankruptcy, payment status and the homeowner’s ability to address the mortgage.
For someone already facing foreclosure, timing can be extremely important.
Selling, transferring or otherwise changing ownership of property immediately before bankruptcy should be approached carefully.
Bankruptcy requires disclosure of financial transactions, including certain property transfers made before filing. Selling a home, transferring ownership to a family member, paying particular creditors or moving assets in an attempt to protect them can create significant complications.
A homeowner considering bankruptcy should understand how a proposed property transaction may affect the case before taking action.
This is another strong reason to speak with a bankruptcy attorney before making major financial changes.
Protecting Your Home Starts With Understanding Your Options
The question isn’t simply,
“Can I keep my house if I file bankruptcy?”
The better question is:
“How will bankruptcy affect my house based on my specific financial situation?”
Before filing, it is important to understand:
- How much equity you have in your home
- Whether Florida’s homestead exemption may protect that equity
- How mortgages and other liens affect the property
- Whether Chapter 7 or Chapter 13 better fits your circumstances
- What happens if you are behind on mortgage payments
- How bankruptcy may affect an existing foreclosure
- Whether other property and assets are protected
At Carratt Law, Attorney Peter Carratt helps individuals and families throughout Tampa, Daytona Beach and surrounding Florida communities evaluate their debts, property and financial goals before determining whether bankruptcy is the appropriate strategy.
Talk With Carratt Law Before Making a Decision About Your Home
If you are struggling with debt, facing foreclosure, or falling behind on monthly obligations, Chapter 13 bankruptcy may provide the relief you need.
Carratt Law proudly assists clients throughout Tampa and surrounding communities with bankruptcy and debt relief matters.
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