BANKRUPTCY CORNER
The Homestead Exemption
JASON S . RIGOLI
The homestead exemption can be one of largest exemptions for a bankrupt debtor . In Florida , the homestead exemption is constitutionally granted and unlimited with respect to monetary value if the property satisfies certain conditions . However , there are some additional limitations and caveats that a debtor in bankruptcy needs to be aware of .
The applicability of exemptions is determined as of the petition date . In re Hampton , 616 B . R . 917 , 921 ( Bankr . S . D . Fla . 2020 ). Florida is an “ opt-out ” state , so Florida debtors , who have been domiciled in Florida for the 730-days prior to the petition date , must apply Florida ’ s state law exemptions . 11 U . S . C . § 522 ( b ), Fla . Sta . § 222.20 .
Florida ’ s Homestead Exemption
Florida ' s constitutional homestead exemption permits a debtor to exempt a homestead of unlimited dollar value , subject to the following limitations :
• ( i ) for the payment of taxes and assessments thereon ,
• ( ii ) obligations contracted for the purchase , improvement . or repair thereof , ( i . e ., mortgage )
• ( iii ) obligations contracted for house , field or other labor performed on the realty ( i . e ., construction lien ),
• ( iv ) for property located outside a municipality , one hundred sixty acres of contiguous land and improvements thereon , which shall not be reduced without the owner ’ s consent by reason of subsequent inclusion in a municipality ; or
• ( v ) if located within a municipality , one-half acre of contiguous land , upon which the exemption shall be limited to the residence of the owner or the owner ’ s family .
Fla . Const . Art . X , § 4 ( a )( 1 ). “ Once a property becomes a homestead , it does not lose that status until it is abandoned .” Carpenter v . Brown , Case No . 13-CV-61183-KMM , 2013 U . S . Dist . LEXIS 112607 at * 7 ; 2013 WL 4047017 ( S . D . Fla . Aug . 9 , 2013 ) ( internal citations omitted ). When is the homestead abandoned ?
“ A homestead has been abandoned when it is no longer a bona fide home and place of permanent abode .” Carpenter , 2013 U . S . Dist . LEXIS 112607 at * 7 ( internal citations and quotation marks omitted ). “ In determining whether a homestead has been abandoned , the owner ' s intent is the main consideration and physical absence ' is not determinative .” Id . ( internal citations and quotation marks omitted ).
Intent seems to be the key . A determination of the Debtor intent is based upon the totality of the circumstances and on a case-by-case basis . The mere listing of a homestead property for sale does not create an abandonment , because under Florida law , the proceeds from the sale of a homestead property remain exempt so long as a debtor intends on reinvesting them into another Florida homestead within a reasonable time . Orange Brevard Plumbing & Heating Co . v . La Croix , 137 So . 2d 201 , 206 ( Fla . 1962 ).
One hypothetical issue that could arise is what if the Debtor intends on selling the homestead property to move out of state on the petition date , but as of the petition date sale and move out of Florida has not occurred , is the Debtor entitled to Florida ’ s homestead exemption ?
Additional Limitations or Other Issues with Respect to Homestead
The are several other issues for the unwary to consider when filing for bankruptcy , as well .
Notwithstanding the 730-day look back period to determine which exemptions apply , the amount of the homestead exemption is capped at $ 170,350.00 , if the property was acquired within 1,215-days prepetition . The homestead exemption does not protect equity proceeds obtained through fraud , although it does protect equity obtained by a debtor ’ s conversion of non-exempt property into exempt
PBCBA BAR BULLETIN 9 homestead property . Havoco of Am ., Ltd . v . Hill , 790 So . 2d 1018 , ( Fla . 2001 ). And , to the extent the debtor is operating a business in homestead property located within a municipality , the homestead can be reduced or lost according to how the property is being used .
Finally , for those Debtors who may have sold a non-Florida residence and moved to Florida , while looking for a new homestead , any sales proceeds being held by the Debtor may not be exempt under the applicable federal homestead law found in 11 U . S . C . § 522 ( d )( 1 ). See In re Richards , Case No . 21-40438-crm , 2022 Bankr . LEXIS 52 , 2022 WL 99503 ( Bankr . W . D . Ky . Jan . 10 , 2022 ) ( holding the federal homestead exemption only applies to the residence and not the sale proceeds ).
Conclusion
The homestead is a powerful exemption for debtors , but failure to consider all the facts and circumstances in a case can result in a big payday for the estate and creditors .
This article was submitted by Jason S . Rigoli , Furr and Cohen , P . A ., 2255 Glades Road , Suite 419A , Boca Raton , FL 33431 , jrigoli @ furrcohen . com .