Overly Concerned About Homestead In New Bankruptcy Law
Changes to homestead protection in bankruptcy have been the focus of initial comments about the Bankruptcy Reform Act's effect on Florida debtors seeking bankruptcy protection. Specifically, homestead protection is limited to $125,000 for debtors who have lived in the house and previous homesteads less than 40 months. I think an even bigger impact of the new bankruptcy law will come from the "forum shopping" provisions. New Section 522(b)(3) specifies that the state law governing exemptions in bankruptcy is the state of domicile during 730 days (two years) before filing. If the debtor did not reside in a single state for that period, the governing exemption law is the place of domicile for the majority of 180 days preceding the two year period. Many people who file bankruptcy in Florida are new residents. These newcomers will be unable to claim in bankruptcy not just Florida's homestead protection but none of Florida's other exemptions including annuities or tenants by entireties protection unless these assets were exempt in their prior domicile. (IRA and pension exemptions are available to all debtors under the Bankruptcy Reform Act)
Another reason the concern about homestead in bankruptcy is exaggerated is that most debtors use second and third mortgages on their homes as their initial option to pay bills and only when home financing fails do they consider bankruptcy. Few people who file consumer bankruptcies have home equity over $125,000 because their equity has already been tapped as their first debt solution.
posted by Jonthan Alper, asset protection and bankruptcy attorney, Orlando, Florida
I have resided permanently in Florida since Feb. 2004. I filed a Chapter 13 in my former domicile, Missouri, in 2004.
I have never owned a home in my name. I am the beneficiary of a trust fund. If the trust gives me the money to buy a home in FL and I put the home in my name, will the Chapter 13 trustee come after my equity? What if I die before my plan is paid off in Sept 2008? The homestead exemption in Missouri is $8000. Am I now protected by Florida law since I am a resident of Florida?