What is an exemption and how does it work?

On Behalf of | Sep 12, 2019 | Chapter 7 |

Those in South Florida who are running into financial trouble may hesitate to file for bankruptcy for a number of reasons.

Aside from a sense of embarrassment or emotional distress, many may worry that, by filing bankruptcy, they will have give up a lot of their hard-earned assets, including property that they really need to survive. In other words, and to use an old saying, they may be worried about losing their shirts.

Fortunately, like in other states, Florida has a set of what in the world of bankruptcy are called exemptions. While they are also important in a Chapter 13 wage repayment plan, exemptions are especially critical in the course of a Chapter 7 bankruptcy.

To review, a Chapter 7 bankruptcy involves a debtor turning over his or her property to an official called a trustee who will then turn the property over to creditors, selling it for cash as necessary. However, during the bankruptcy, the debtor may claim that the property is subject to one of Florida’s exemptions and thereby hang onto it, keeping it safely out of the reach of creditors.

The idea behind an exemption is that someone who honestly fell on hard times should be able to keep enough property to survive and to get a new start on their financial lives.

Florida law has many helpful exemptions that citizens can use to help protect some of their assets even in a bankruptcy. For instance, in Florida, many homeowners can protect the entire value of their residence from creditors. They should keep in mind, however, that an exemption will not ordinarily protect them from the foreclosure of a mortgage that they put on the home themselves.

A resident of South Florida that has questions about how exemptions might work in a bankruptcy should consider speaking to an attorney with bankruptcy experience.