Individuals in Orlando often turn to Chapter 7 bankruptcy when they are dealing with an overwhelming amount of debt. This is a legal process that allows you to get rid of some of your debt and gives you a fresh start. However, many people are of the belief that you lose everything when you file for bankruptcy, especially your reputation.
In reality, filing for Chapter 7 bankruptcy allows you to protect your essential assets and have a sense of financial stability. Various federal and state laws outline the specific properties you can protect. This can range from your home to your vehicle. If you have debt, consulting with a Chapter 7 Business Bankruptcy attorney can help.
Understanding exempt and non-exempt assets
Exempt assets refer to those assets that the debtor is allowed to protect during the liquidation by the bankruptcy trustee. These assets are typically those that you require for your living and working so that you can maintain a functional life after bankruptcy.
Common examples of exempt assets include a primary residence, a motor vehicle up to a specific value, necessary clothing, and household goods.
On the other hand, non-exempt assets are those which can be sold or liquidated by the bankruptcy trustee to pay off creditors. These are not protected under the exemption law and typically include additional vehicles, valuable collections, and luxury items.
Before one files for bankruptcy, it is recommended to be aware of your non-exempt assets. You do not want to be taken by surprise when you see your loved one’s gift being sold.
Common exempt assets in Chapter 7 bankruptcy
Florida provides various exemptions to Chapter 7 bankruptcy filers to protect their essential living items. Here are some of them:
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Homestead exemption.
The homestead exemption is the most generous type of exemption, allowing Florida residents to protect an unlimited amount of equity in their primary residence. However, it should be less than half an acre in a municipality or 160 acres elsewhere.
Another rule to know about this exemption is that you only qualify for it if you have owned the house for at least 1,215 days prior to filing for bankruptcy. If the ownership requirement is not fulfilled, the exemption is limited to $189,050 as of 2024.
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Personal property exemptions.
You might own some personal property that you want to protect during bankruptcy. Florida residents are allowed to exempt $1,000 in personal property and $2,000 when filing a joint bankruptcy. There also exists a wildcard exemption where singles get $4,000 in exemptions, and joint filers get up to $8,000, provided that they do not claim the homestead exemption.
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Motor vehicle exemption.
Individuals in Florida can exempt up to $1,000 of equity in a single vehicle, and the amount doubles for joint filers. However, the exemption must only be applied to one vehicle, and you cannot claim additional vehicles.
There is a new law, which only got into effect on July 1 of this year, stating that individuals can now exempt up to $5,000 in a single motor vehicle.
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Retirement accounts.
Florida law provides lots of protections for retirement accounts. In fact, you can protect 100% of your funds in recognized plans, including 401(k)s, IRAs, and profit-sharing plans.
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Life insurance and annuities.
You can protect 100% of the funds you receive from your life insurance policy. For example, if you get a death benefit payout, that money is protected from creditors. Moreover, you can also protect your cash surrender value. This exemption also protects any payments you receive from an annuity.
Protect what matters to you!
While the laws are complex, understanding Chapter 7 bankruptcy and its exemptions is crucial to protect what matters. If you believe you might need to file for bankruptcy, hire an attorney in Florida today!
