How Florida Homestead Exemption Works
It's a common misconception that all and any of your debts will be wiped out if you file bankruptcy. That is not true. If you file bankruptcy, your home may be protected by Florida's homestead exemption.
Florida Homestead exemption is a mechanism that provides relief against lawsuits. In Florida, your home is safe if used as your primary residence.
For instance, you live in Florida and own or rent a house or a condo. The house has a market value of $300,000, but you cannot pay your mortgage.
If you file for a Chapter 13 bankruptcy, your home will not be seized to repay the loans you took for the house.
Florida Homestead Exemption has four features
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The "homestead" of a family (usually the family's principal residence) cannot be sold to satisfy unpaid taxes or other debts.
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A debtor must make a formal written waiver of the homestead exemption before a creditor may pursue a debtor's property.
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When a debtor voluntarily sells the homestead, the debtor is protected from any deficiency judgment (a creditor cannot collect any leftover debts after the sale of the property).
- The homestead exemption is protected by the federal constitution and cannot be altered or repealed by the state legislature.
Who qualifies for homestead exemption in Florida?
All Florida homeowners have homestead exemption attached to the deed of their primary home. However, if the house is not registered under the owner's name, the exemption may not be available. To qualify for the homestead exemption, your home must be located in Florida, and you must be a permanent resident of Florida.
It is essential to have specific evidence of your Florida residency. This includes, but is not limited to, Florida driver's licenses, utility bills, the address provided on your last tax return, bank statement addresses, and your Florida voter ID card.
Don't Lose Your home.
In forced sale
Your homestead property is exempt from creditors' lawsuits under Article X, Section 4 of the Florida Constitution. In other words, creditors cannot force people to sell their homes to satisfy judgments. The exemption does not generally have a monetary limit.
Thus, Floridians can invest millions of dollars in their homes and be fully protected. This doesn't just apply to single-family homes. Florida courts have also granted homestead protection to condominiums, manufactured homes, and mobile homes.
Tax levies
Tax exemptions are available to residential property owners. In Florida, homeowners who qualify for the homestead tax exemption get to save insane amounts of money on yearly property taxes.
You must own a substantial piece of real estate, either the property where you reside permanently or the property where your dependents reside permanently.
Your home may be eligible for a $50,000.00 homestead exemption.
A basic exemption of $25,000 covers all property taxes, plus school tax. Tax exemptions up to $25,000 are available for property valued from $50,000 to $75,000 for non-school-related taxes.
Additional ways to protect your home from a Florida Lawsuit
Umbrella insurance
An "umbrella" policy covers various causes of claims that could arise. In essence, umbrella insurance acts as a protector over any other insurance policies you may carry.
The cost will be between $300 and $500 a year for coverage of $1 million to $2 million. That being said, most umbrella policies won't cover fraud, criminal activity, reckless behavior, or even negligence.
Tenants by the entirety
A unique way of protecting your home is by titling it "Tenants by the Entirety." Essentially, this privilege prevents the property from bifurcation if one spouse is sued.
Equity stripping
Putting a mortgage on your home allows you to remove equity and replace it with a loan. When your home doesn't look attractive, a potential creditor will be less likely to take it as payment for a judgment.
Title the home under the "low risk" spouse name
If one spouse leads a more risky lifestyle or has a more risky career, placing assets in the other spouse's name might be highly advantageous. Creditors of one spouse cannot seize separate assets owned by the other spouse.
Thus, to protect assets in the marriage, the spouse least exposed to risk must hold valuable assets as separate property. A prenuptial or postnuptial agreement (a marital property agreement) could help the spouses agree to keep certain assets separately without risking lawsuits.
If you have any questions concerning how to utilize Florida Homestead and other property protection strategies, you can contact us on our site. Let us help you keep your home safe from creditors and the taxman.
With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.
By Phil Ganz
Edited by Ryan Skerritt
