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Florida Homestead Exemption A Bankruptcy Landmine

Winter Park Florida business and civil litigation attorney Eric Lanigan has seen a range of bankruptcy challenges that individuals will run into. The Florida Homestead Exemption is one of the unknown “landmines” in bankruptcy.

While many people know that Florida homes are generally “safe” from bankruptcy creditors because of well-known state protection provided by the Florida constitution, things can change when going into Federal court–where all bankruptcies are filed. 

In other words, a Florida Homestead Exemption may be challenged if not properly analyzed. Eric Lanigan talks about the issues that can cause homeowners quite a shock if they are working with someone unfamiliar with the intricacies of bankruptcy law. Watch the video on this issue on the channel: “.”

Another bankruptcy landmine has to do with the Florida Homestead Exemption. Florida’s famous for its homestead exemption in that whatever equity value you have in your home is exempt from the claims of creditors. A thousand dollars, a million dollars; it doesn’t matter, it’s exempt. And because the exemption is created under the Florida constitution, Florida’s Supreme Court has ruled on several occasions that the legislature cannot do anything to infringe upon that constitutionally-created exemption.

And what that means in practical terms is the statutes that the Florida legislature has passed dealing with setting aside transfers and conveyance done in order to avoid creditors which are generally referred to as fraudulent conveyances that those laws have no impact on the homestead exemption. So someone in Florida who’s being let’s say chased by creditors, they can take their money they can buy their house with cash or they can take their money and pay down their mortgage.

And even if they admit that they did it so that the creditors couldn’t get that money it doesn’t matter. Because none of the fraudulent conveyances statutes apply to Florida Homestead exemption.

However, when you move into the bankruptcy court it’s a different story. Because bankruptcy deals with Federal law not state law. Furthermore the bankruptcy courts have ruled that because you’ve voluntarily come into bankruptcy you accept the bankruptcy laws as they are. 

And under the Federal bankruptcy law, the fraudulent conveyances statutes apply to all property. It doesn’t matter whether it’s Florida Homestead exemption or IRA or any other property, the fraudulent conveyance always apply. So while someone may put money into their home to protect it from the claims of creditors, under state law they’re going to be protected.

If they move into bankruptcy court they need to be very careful that that issue is properly analyzed to make sure that money is still protected in the bankruptcy court. 

Contact Winter Park Florida lawyers Eric Lanigan and Roddy Lanigan by calling to find out if your home is safe going into Federal bankruptcy court.  

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