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

The word on the street is that involuntary bankruptcy petitions are on the rise- as expected. Florida residents have unlimited homestead protections outside of bankruptcy, but once they are in bankruptcy court the same debtor's homestead protections are limited by the new bankruptcy law. Where several creditors have substantial claims against a debtor it is usually to the creditors' advantage to have the debtor in bankruptcy.

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The new bankruptcy law imposes a "means test" to determine if certain debtors are eligible to file Chapter 7 bankruptcy. Only debtors who, according to the means test formula, lack the ability to repay substantial portion of their debts may file Chapter 7.

Most people do not yet understand that the means test applies only to consumers. Consumers for bankruptcy purposes are people whose debts are primarily consumer related. People who incur most of their debts from business are not subject to the means test, and they may file for Chapter 7 without application of the means test formula. People who find themselves insolvent because they borrowed money on credit cards to support a business or an investment, or people who seek bankruptcy protection from personal liability on business related debt can file Chapter 7 under the new bankruptcy law regardless of means test standards.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

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The new bankruptcy law includes provisions with income tax effects. Milt Baker, a Michigan CPA has a discussion on how the Bankruptcy Reform Act affects traditional tax planning vehicles such as retirement funds on his tax blog called CPA Sense. Link: cpasense.

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I have been receiving several email questions about the new bankruptcy law. One person complained because the new information was not yet incorporated on my website. This law is more complex than it seems. It raises many issues that will take years to resolve through court decisions. I am planning to attend a seminar on the bill soon, and will probably attend several more this year. There is no benefit to a fast analysis six months before the bill's effective date. Some people want to be the first to publish information about the bill as if being first to deliver the news is of some benefit. What is most important is to understand and process the law's changes in a thoughtful manner. People who rush to change asset protection plans may be making hasty mistakes. Keep in mind, as previously stated on this blog, the new bankruptcy law does not change Florida's homestead law or asset exemptions in state court proceedings. The changes are important only if a debtor files bankruptcy.

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