Bankruptcy

Homestead Exemption and Entireties Exemption Are Independent Protections

By Jonathan Alper

A joint debtor?s homestead can be exempt in bankruptcy either as homestead pursuant to the Florida Constitutional exemption or exempt as tenants by entireties pursuant to the exemption established by our state court judicial traditions. Suppose that five years prior to filing bankruptcy a couple is subject of a civil money judgment, and that they invests a large sum of cash in a Florida homestead in order to protect the money from their creditors. They take title to the homestead as tenants by entireties. During the five years they suffer additional judgments, incur more debt, and that today on of the spouses files Chapter 7 bankruptcy. The new bankruptcy law says that if debtors invest money in a homestead to avoid creditors within 10 years of filing bankruptcy the transfer is subject to reversal as a fraudulent conveyance and that the property loses its bankruptcy exemption. The issue is whether the debtors can exempt their home as entireties property. Tenants by entireties property is exempt in a Chapter 7 bankruptcy filed by one spouse to the extent there are no joint debts of the filing and the non-filing spouse.

Tenancy by entireties protection is not subject to the 10 year fraudulent transfer window under the Bankruptcy Code. There is a four year statute of limitations on fraudulent transfers under Florida statutes. (with exceptions). If the debtor?s purchase of the Florida homestead is exempt in bankruptcy as tenants by entireties property provided that the purchase cannot be reversed as a fraudulent transfer under Florida law. That a debtor's  homestead exemption might be set aside under the 10 year look back of the Bankruptcy Code does not change alternative protection afforded same debtor by Florida?s entireties law. Debtors should keep in mind that homestead protection and entireties protection are independent alternatives; generally, problems with one protection does not diminish the other. See, In re: Davis, Case No. 8:08-4348.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida

Full post as published by Florida Bankruptcy Law on May 08, 2009 (boomark / email).