How can a Florida debtor protect a $185,000 tax refund? We all know that homesteads in Florida are fully exempt from creditors(I am overgeneralizing). Under Florida law, savings or similar assets can be used to purchase a house or pay down a mortgage, and the homestead is exempt, even if there were creditors at the time. However, the new bankruptcy law in 2005 provides for a 10 year fraudulent transfer period to challenge the homestead exemption in these circumstances.
Recent debtors received an amazing holiday present. In re Cook, 2011 Bankr. Lexis 4757 (Bankr. N. D. FL Dec. 7, 2011), the debtors had lost their home that was once worth $5,000,000. The joint debtors received a $185,000 tax refund in 2010, and used this as a downpayment on an $800,000 home. The chapter 7 trustee and a creditor objected to the homestead. Judge Killian held in favor of the debtors. Even though there were some badges of fraud, the Court did not find that there was fraudulent intent and recognized the importance of Florida homestead protection.
Frankly, I might not have filed this case. There is a huge risk for a debtor to file bankruptcy in these circumstances, and a bankruptcy judge in South Florida including Broward County might have ruled against the debtor.