Articles Posted in Exempt Assets

Before spending a single dime from your IRA or 401k in an attempt to make ends meet, you should meet with an attorney. Most retirement plans are exempt from the reach of creditors in a bankruptcy, even those not subject to Employee Retirement Income Security Act (ERISA).

Many people I meet have used up or begun to use their retirement accounts before considering bankruptcy. The thought in mind is, “I’m going to lose it anyway, I might as well use it, even if in vain.” Unfortunately, some of these people are even assessed non-dischargeable tax penalties for early withdraw of funds.

Federally, 11 U.S.C. 522(d)(12) sets out retirement exemptions, but because Florida has opted out of the federal exemptions, so we must use Florida state law. The Florida state law provision protecting qualified retirement plans is Fla. Stat. Ann. § 222.21 (2) .

Many people who come through my door want to know if their personal property is at risk of seizure in a bankruptcy. Generally, the answer is no, but it really depends on how much property we’re talking about.

A certain amount of property is exempt in bankruptcy. Which property qualifies as exempt depends on which state you live in and how long you’ve lived there. The state of Florida requires you to use its exemptions if you’ve lived here for two years or more.

Up until 2007, Floridians filing bankruptcy were able to exempt $1,000.00 in vehicle equity, $1,000.00 in personal property and their homestead property. However, many debtors lacked a homestead property, making the bankruptcy rules inequitable to a large class of debtors. Because Florida exemptions favored home owners for so long, an bill, CS/SB 2118 was passed to change the homestead portion of the exemption from “a homestead” to, “a homestead or $4,000.00 in additional personal property.” Oddly enough, it was in part the efforts of Douglas Neway that helped pass this bill. Douglas Neway is the Chapter 13 trustee, the very person whose job it is to attempt to collect money on behalf of the creditors.

If you are in a Chapter 7 bankruptcy and your personal property exceeds the exempt amount, we can offer the trustee a “buy back” plan. In one of these plans, we offer the trustee a manageable monthly payment to allow you to retain your property. If you don’t or can’t pay the monthly payment, you must surrender the property or have your discharge revoked. In a Chapter 13 the “buy back” option is automatically accounted for in the Chapter 13 payment plan.

Another way we have been keeping personal property from the hands of the trustee is by exempting it as property held as, “Tenancy by the Entireties”, a unique form of property ownership that requires a couple to be married couple and debts to be allocated a particular way.
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Many people considering bankruptcy have religious concerns and wonder if they can still be a good Christian or Jew and simultaneously file bankruptcy. Very few people know that the origins of bankruptcy actually come from Deuteronomy 15:1-2 which reads:

“At the end of every seventh year you are to cancel the debts of those who owe you money the Lord himself has declared the debt canceled.”

This is the reason why people can only file a Chapter 7 bankruptcy every eight years (eight years being the end of the seventh year). To take things further, the United States Bankruptcy Code permits a substantial tithe contribution to qualified charities if made under certain circumstances.