Florida Asset Protection : Asset Protection Law & Planning in Florida - Florida Homestead Exemption

Readers of this Blog know how to title their bank accounts so they are protected from judgment creditors. Suppose a married person owns his accounts as tenants by entireties or in the name of a separate legal entity, and the creditor nevertheless issues a writ of garnishment of the bank free temporarily freezing the money in these exempt accounts. What do you do ?

The first thing you should do is file a standard form with the court claiming your right to exempt this money. Better yet, have your lawyer file a motion to dissolve the garnishment. It is important to know that the Florida statutes entitle you to an "immediate" hearing on your motion to dissolve a garnishment. Be prepared to bring copies of bank statements, signature cards, or account agreements to show the judge.

• Email This
• Print
• Comments (20)
• Share Link

I was visited by a Canadian bankruptcy trustee vacationing in Florida who wanted to learn more about our bankruptcy system. Canada has the equivalent of Chapter 7 and Chapter 13 bankruptcy statutes. The main difference between their system and our own is their exemptions. Exemptions differ by Province. In Ontario, for example, the Debtor gets no homestead exemption. Ontario provides more liberal personal property exemptions such as $10,000 household goods, a $5,000 vehicle exemption, $5,000 clothing, plus a $10,000 household furniture exemption. Another interesting difference is that throughout Canada bankruptcy is mostly non-judicial. Bankruptcy petitions are not prepared by attorneys, and attorneys normally do not represent debtors before the trustee. A debtor seeking to file bankruptcy submits to the jurisdiction of a licensed bankruptcy trustee who examines the debtor and collects non-exempt property. There are about 900 licensed trustees throughout the country, most of whom work for corporations. The trustees in private practice must develop their own practice and solicit debtors as customers. My visitor, a licensed trustee, said he charges about $1,400 per case.

• Email This
• Print
• Comments (2)
• Share Link

A caller from Kentucky asked about asset protection of several rental properties located in Florida and owned jointly with his wife. The caller was facing a potential civil judgment against him individually, but his wife was not named in the lawsuit. Property owned by husband and wife in Florida is presumed to be owned as "tenants by the entireties", and such property is immune from judgments against either spouse individually. This caller was a resident of Kentucky, and that state does not recognize tenants by the entireties ownership and not other exemption is given to marital property. The question was whether the jointly owned Florida properties are protected from a Kentucky judgment against and individual Kentucky resident who owns Florida real property jointly with his spouse.

• Email This
• Print
• Comments
• Share Link

One of my clients suggested an ingenious way to shelter equity in a motor vehicle which otherwise would be vulnerable to creditors attack. The client proposed to lease an expensive car, and after a few months, pre-pay the majority of lease payments. After three months the client proposed to file bankruptcy.

The leased car would not be an asset subject to creditor attack because it is not property owned by the debtor. The prepayment of lease obligations is not a fraudulent conveyance because the client would be receiving reasonable consideration for the payment in the form of car use. If the client does not file bankruptcy he is free to make prefer one creditor over other creditors and make special arrangements or grant security to the preferred creditor. If the client files bankruptcy the pre-payment of lease obligations more than three months prior to filing would not be a reversible bankruptcy preference.

• Email This
• Print
• Comments (1)
• Share Link

My health insurance agent, Mark Boxman, suggested changing medical insurance from a traditional PPO plan to a high deductible plan funded though a Health Savings Account. Naturally, one of my first inquiries was to see if the Health Savings Account is an exempt asset under Florida statutes.

Health Savings Accounts ("HSAs") were recently enacted as part of the 2003 prescription drug bill in Congress. Health insurance companies this year have offered new high deductible insurance plans that are legally compatible with HSA accounts. HSA accounts were modeled after MSAs which are specifically exempt from creditors judgments under Florida Statute 222.22. Under current Florida law these new HSAs are not exempt from creditors. However, there is a proposed statutory amendment pending in the Florida Senate that would afford to the new HSA account the same protections enjoyed by MSAs. Given the importance of HSAs in today's medical insurance planning and their role in reducing insurance costs I expect that the Florida legislature will enact creditor protection for HSAs. In that event, HSA balances would also be exempt in bankruptcy proceedings. The HSA is not only a useful tool to lower health insurance premiums, but it is also a part of Florida asset protection planning and bankruptcy law..

• Email This
• Print
• Comments (2)
• Share Link

I was in a deposition today representing a lady who was the recipient, transferee, of an alleged fraudulent conveyance. The allegations are unique; here's what happened. My client, a professional mortgage broker, loaned money to a businessman evidenced by a promissory note. The note stated that the loan was secured by two parcels of real estate and a mortgage note receivable from a third party. At the time of the loan, the collateral's value was close to the original note amount. The note was not recorded, and there was no separate mortgage. My client did not know the borrower at the time of the loan, but subsequent to the loan they became good friends. The businessman found it impossible to make payments on the note. My client and the businessman agreed that to satisfy the note the businessman would assign to my client all the collateral. The collateral by then had appreciated, and my client received assets close to double the amount of money she originally loaned. Just over one year after the assignment of collateral the business man filed Chapter 7 bankruptcy. The trustee is suing my client to recover the assigned assets.

• Email This
• Print
• Comments
• Share Link

A new bankruptcy law reform has been introduced to overhaul the nation's bankruptcy code. This past week Senator Grassley (R-Iowa) introduced a bill which makes it more difficult for debtors to file Chapter 7 bankruptcy The bill aims to cut down on abusive and frivolous bankruptcy filing. Its principal change is a "means test" for people wanting to file Chapter 7 bankruptcy. People who earn less than the median income in their state are exempt from means testing. Especially important for people wanting to take advantage of Florida homestead protection, the bill proposes a limitation on the amount of money which can be exempted in bankruptcy under Florida homestead protection. The limitation applies only to people who have recently moved to Florida. The bills assault on homestead protection applies only to those debtors who file bankruptcy. The bill does not otherwise take away any of Florida's constitutional homestead protection.

• Email This
• Print
• Comments (1)
• Share Link

I received a call from an attorney in Alabama about his physician client who was interested in declaration of Florida residency and protection under Florida homestead law. The physician owned a house in Florida which he visited occasionally. He had a Florida drivers license, was registered to vote in Florida, and had filed a declaration of domicile in Florida courts. The physician was not licensed to practice medicine in Florida. He and his family lived in a house in Alabama where his children attended school. He worked in Alabama and earned no income working in Florida.

• Email This
• Print
• Comments (1)
• Share Link