Can I Protect My Homestead in Bankruptcy If I Am Behind on My Payments?

Will filing for bankruptcy protect your homestead if you are behind on your payments? In Florida, the answer is usually yes. Now, that is not an all-encompassing, yes. It is a qualified yes. If you plan on keeping the home, a chapter 13 bankruptcy could afford you an opportunity to do so if you are behind on the payments. Likewise, if you are current on the payments and filing chapter 7 or chapter 13, the bankruptcy code allows you a way to continue making payments on your homestead.

If you were concerned about your equity in your homestead when you file bankruptcy, the answer is usually, yes, it will be protected. That is, it will be protected if you want to keep the home, are willing to continue making the regular monthly payment, and intend to catch up on all missed payments over the life of your chapter 13 plan.

Florida Law Favors the Homestead

There may be times when your homestead equity could be subject to the bankruptcy court’s jurisdiction and your creditors’ claims, but those times are very few and far between. Again, if you and your family fell on hard times and are behind on a few mortgage payments, but are able to catch up, a chapter 13 reorganization may be just what you need to save your home and all of the equity in that home.

The State of Florida, its constitution, and the caselaw interpreting the homestead laws overwhelmingly favor protecting the home for Florida families. As a rule of thumb, the longer that you own your home, the better off you are. But, even if you just purchased your home, you should be able to exempt the equity in your homestead without a problem. As always, it’s in your best interest to check with an experienced bankruptcy attorney before filing for personal bankruptcy and having a discussion with them about your homestead equity.

Unlimited Homestead Equity Protection

There are only a few states in the United States that allow homeowners to have unlimited homestead equity protection. Florida is one of those states. For example, if a creditor is coming after you and you own a $1 million house with no mortgage, the creditor cannot go to court, win a judgment, and put a lien on your homestead.

The creditor’s judgment will be just a piece of paper that they will have to try to enforce another way, but they cannot put a lien on your homestead, provided that there are no shenanigans with regard to your homestead. You will be able to sell your homestead free and clear of that judgment creditor’s lien and you can keep the proceeds protected while you look for another homestead.

Now, if you don’t reinvest all $1 million of those proceeds from the sale of your homestead, the creditor may be able to go after the remaining funds but that’s a discussion for another time.

If you have any questions about whether the equity in your homestead is protected from your creditor’s claims, please feel free to call The Dellutri Law Group at (800) 391-4337. You can schedule a free consultations with one of our expert attorneys.