Florida Homestead Exemption Not Unlimited in Bankruptcy

Recent case law addresses an issue that all bankruptcy attorneys in Florida should be fully familiar with. BAPCPA made substantial changes to restrict the unlimited homestead protection. (For a detailed article, see my discussion at www.solomonlawoffice.com , look for seminars for attorneys, homestead.)

One of the homestead changes in BAPCPA is that a debtor cannot take non-exempt assets and use them to increase the equity in the homestead with the intent to hinder, delay or defraud creditors. This would be permitted under Florida law(unless perhaps the funds were tainted, such as acquired by theft or embezzlement).

In a recent Broward bankruptcy case, a debtor sold over $40,000 in securities and paid down the home mortgage. The funds were used to improve the homestead a few months before the bankruptcy. This Pembroke Pines resident did not initially disclose this information in the bankruptcy papers filed with the court, according to the court. One of the bankruptcy judges in Broward, Judge Olson, held that the home was not exempt to the extent of this transfer of funds. In re Osejo, 2011 Bankr Lexis 582, (Bankr. S.D. Fla. Feb. 24, 2011). The court also cited Judge Isicoff’s decision in In re Garcia, 2010 Bankr Lexis 2194(Bankr. S.D. FL 2010).

The statutory basis is Section 522(o)(4) which permits a 10 year look back period. But the trustee would still have to establish the transfer was made with the intent to hinder, delay or defraud a creditor.

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