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

A man from southwest Florida  consulted with me about filing Chapter 7 bankruptcy in Ft. Myers, Florida bankruptcy court. The client and his non-debtor spouse lived on their sailboat docketed at the marina. The boat’s motor was broken but the sails worked. The boat was registered on a national boat registry with a federal boat ownership certificate. The ownership was listed as: husband wife. Not husband and wife, not husband or wife, and there was not choice of specifying ownership as tenants by entireties, tenants in common, or even as joint tenants with rights of survivorship. The client wanted to know if his boat was exempt from creditors under Florida law.

There are two possible exempts applicable to this boat: homestead and tenancy by entireties. A boat can be a homestead so long as the boat is permanently docket and is not suitable for transportation. A seaworthy  boat is more like a “boat” than a “home.” This client’s boat could sail. However, the client explained that the boat could not reach open water without navigating though the docks and other docked boats which it could only do with a working motor. The client stated his boat could not sail away from its docket location without a motor.

In my opinion, this sailboat is currently not seaworthy. The client is using the boat more as a “home” than as transportation. I think this  boat would be exempt homestead. However, if the boat’s motor is easily repairable a court could find that the asset is primarily a “boat” which is only temporarily immobile.

 

Even if this sail boat is not considered this debtor’s homestead, the boat would still be exempt from the husband’s creditors if it is titled as tenant by entireties. Under Florida law assets owned by a husband and wife as joint tenants with survivorship are presumed to be owned as tenants by entireties.  The boat  title is not clear on its face. Simply listing the names of the husband and wife gives no indication of whether they own the boat with rights of survivorship.

If the boat’s title instrument was a Florida state document, similar to a car title, I think most courts would not find entireties ownership. There are Florida court cases which  require that state boat or car titles list the married owners specifically as tenants by entireties or as husband and wife in order to claim an entireties exemption. I do not think the same Florida court decisions regarding cars or boats registered with a Florida title would apply to this client’s boat with a national registry. In this instance, the owners’ intent is unclear on the face of the document, and absent court decisions interpreting entireties requirements for such federal title certificates I think the general presumption favoring tenants by entireties ownership of jointly titled assets would apply.

 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

There was a recent post about a conversation with a debt collection attorney concerning what he believed were, and were not, effective collection tools. I reported that this collection attorney did not find wage garnishment to be a good collection tool because wage garnishment often drove debtors into bankruptcy.

I received different opinion from another experienced collection attorney from the Tampa area who writes:

"I couldn’t disagree more with whomever disparaged wage garnishments.　They are my number one collection tool in this economy.　 With jobs scarce, people cannot afford to quit and seek new employment which they would have done prior to the recession.　I can usually stipulate most every contested wage garnishment or win evidentiary hearings on the head of household issue due to the difficulty in actually proving it. 　Furthermore, it is far easier to verify employment(thus ensuring a "hit") verses a bank account which is hit or miss.　I have no found bankruptcy to be an issue at all."

 This attorney's  opinion is consistent with my own experiences in bankruptcy practice. I have a few bankruptcy clients who say they are filing bankruptcy because their wages have been garnished, but I don’t find that wage garnishment is a primary cause of bankruptcy. Most bankruptcy debtors I deal with anticipate collection. In other words, most people file bankruptcy before a creditor gets a judgment which would subject their wages to garnishment. If a creditor attorney garnishes wages then in most cases the debtor cannot file Chapter 7 bankruptcy for one reason or another.

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

The more I speak with or read articles by other bankruptcy and asset protection attorneys the more I realize that our clients ask us all the same questions. One very common client concern is rebuilding credit after a bankruptcy. Credit is not a legal issue, and repairing credit scores is not within my professional expertise. I look to my clients experiences and writings by other experts to learn what I can about credit repair. I recently saw an interesting blog post on rebuilding your credit by Texas bankruptcy attorney Brian Fears.

One suggestion in Mr. Fears' article is making sure you promptly pay loans that survive bankruptcy such as student loans or reaffirmed secured debt. The debts Mr. Fears refers to must be paid.

However, too often, my own clients want to reaffirm unsecured credit cards in order to help rebuild their credit score. This is usually a bad idea. I don't think its worth obligating yourself to pay those credit cards that can be wiped out in your bankruptcy case. Good credit scores are helpful; cash is even more helpful. I try to convince clients to minimize post bankruptcy obligations even if it means taking longer to prove credit worthiness. Mr. Fears correctly advices that you should build post-bankruptcy credit scores based only on those debts which cannot legally be discharged in bankruptcy.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A client asked me two homestead questions which questions I have previously heard from other clients or email inquiries. This client owned a homestead with significant equity within a municipality. Homestead properties within a city up to ½ acre in lot size are protected under the Florida Constitution. The client said he intended to buy a ½ acre lot adjoining this existing homestead as an investment, and he wanted to know if the lot would be protected from creditors. My opinion is that the lot purchase would jeopardize the homestead protection of his existing house. Homestead includes the property upon which your residence is located as well as all contiguous land. If the client purchased the adjoining lot and took title in his own name the adjoining lot would be incorporated into his homestead and the size of his entire homestead would increase from ½ acre to a full acre. Thereafter, only 50% of the total homestead would be protected within the city limits. The client could not apportion protection to the original lot on which the house is situated. The purchase of the contiguous lot in his own name would forfeit protection of 50% of his house value. A better strategy would be to form a limited liability company and have the LLC purchase the adjoining lot. Because the client does not personally own the new lot it would not add to the size of his homestead. Land owned by entities, as opposed to natural persons, cannot be homestead property. The LLC would give some, although imperfect, asset protection.

 

The second question concerned the bankruptcy rule that requires a bankruptcy debtor to own a homestead property for 40 months in order to get unlimited homestead protection in bankruptcy court. If a debtor owns homestead 1, sells homestead 1 for a profit, invests the profit in homestead 2, and then files bankruptcy, the time of homestead includes ownership of homestead 1. A client posed the following question: the client owned homestead A for many years. During the real estate crash he did a short-sale of homestead A and immediately purchased homestead B with new money. The client believes that since he can continuously owned a Florida homestead, including A and B, for more than 40 months he should have unlimited homestead exemption in homestead B. I don't think the law is intended to add the ownership period of homesteads A and B in this example because no equity from A was invested in B. Ownership periods are grandfathered when the debtor transferred equity (sales proceeds) from one homestead to a new homestead. Investment of money other than homestead sales proceeds begins anew the ownership clock for purposes of the Florida homestead exemption- that's my interpretation.

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

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