The key to understanding the place of real estate in bankruptcy is awareness of the Florida homestead exemption specified by Article X, Section 4 of the Florida constitution. According to this law, the home that you own in this state is exempt in bankruptcy, protected from creditors and bankruptcy trustees alike.
The homestead exemption applies to a home of any size, including a mobile home, as long as the land it is on is no bigger than half an acre in a city or 160 acres outside of city limits. Unlimited equity exemption is available to filers of bankruptcy who have lived in Florida for more than 40 months. Equity limits of approximately $137,000 per spouse apply for filers of bankruptcy who have lived in the state for 40 months or less.
Is It in Your Best Interests to Keep Your House at All Costs When You File Bankruptcy?
Although you are entitled to keep your home when you file bankruptcy, it is important to step back and ask yourself if it is really in your best interests to do so.
- Can you keep up with the mortgage payments and taxes?
- Is your mortgage currently "upside down," meaning that you owe more than what the house is worth?
- Would your life be less complicated without the responsibilities of home ownership, including repair and maintenance costs?
If the equity that you have in your home is very low, you may want to question common wisdom that says that a home is your most important investment. Many homeowners have found the opposite to be true: They find that their homes are bottomless money pits and cause non-stop headaches rather than providing pleasure and security.
Renting May Be a Better Option
Many people who rent homes, on the other hand, find that doing so is more beneficial than owning for a number of reasons:
- Rather than worrying about the next new roof, air conditioner or plumbing repair, renters can focus on other aspects of their financial big picture, such as starting a savings plan.
- Renters can concentrate on priorities such as taking care of health expenses without home maintenance problems piling on more challenges in daily life.
- Renters are free to search for the next best job, regardless of location.
- If a neighborhood goes downhill, renters can move out. Homeowners, on the other hand, sometimes feel trapped in their own homes when their neighborhoods become unsafe and it becomes difficult to impossible to sell.
What if Your Home Goes Into Foreclosure?
Quite a few bankruptcy clients of P.R. Smith Law Group P.A. have used the threat of foreclosure to their advantage. They have included their homes and mortgages in their bankruptcies. This has allowed them to live in their homes rent free and mortgage payment free for a year or more while the foreclosure process moves forward. These clients have emerged from their bankruptcies with a truly fresh start: Their consumer debts have been discharged, they have found freedom from their previous upside-down mortgages, and they have enjoyed a new opportunity to put savings in the bank.
Talk to an Attorney About Florida Bankruptcy and Your Real Estate · Free Initial Consultation at P.R. Smith Law Group, P.A.
Consider all the facts, weigh all your options and make the right moves with regard to your home and your bankruptcy plans. Consider the pros and cons of any proposed solution to financial problems involving real estate as you prepare to file bankruptcy:
- Mortgage modifications and foreclosure relief plans
- Short sales
- Short sales versus deed in lieu of foreclosure
To speak with an attorney about your Florida real estate and bankruptcy, contact the P.R. Smith Law Group to schedule a free initial consultation. Call us in Tampa or in one of our other Florida offices toll free at 888-682-5251 to make an appointment with a bankruptcy lawyer with an in-depth understanding of real estate issues.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
