[caption id="attachment_171" align="alignleft" width="300"] PHOTO CREDIT: Beautiful Home | © Colleen Coombe | Dreamstime Stock Photos[/caption]
In addition to tax savings on a primary residence, Florida's homestead exemption can offer protection in times of severe financial distress, such as bankruptcy.
Florida homeowners typically apply for a homestead exemption on their primary residence to reduce their tax burden. However, this exemption also can protect one's home from being forcibly sold by a creditor—unless the creditor is the actual lien holder (e.g., mortgage lender) on the property.
During bankruptcy, Florida's homestead exemption offers crucial protection. Residents in states not offering this special exemption can lose their homes in bankruptcy if they are unable to pay the additional money required to keep their homes. However, In the State of Florida, any homeowner who has been a resident for at least two consecutive years may claim the homestead exemption to protect their home from becoming part of the bankruptcy estate, and thereby subject to creditor claims.
Protections Under the Homestead Exemption
The homestead exemption not only protects the home from unsecured creditors—such as credit card companies or medical bill collectors—but it also can provide protection from the mortgage company itself (for a limited amount of time, depending on the chapter filed and whether the debtor can catch up on outstanding balances during the time of the bankruptcy filing).
Additionally, the home remains exempt even for debtors who own the house outright or have equity in their home. Other assets with value, such as vehicles or collectible items, are not exempt from creditor claims and would probably end up being auctioned to raise funds to pay creditors.
It is good to be a homeowner in Florida, where the homestead exemption protects your home in the event you encounter tough times. While Florida bankruptcy exemptions may appear stingy on some issues, when it comes to primary home protection, they beat the majority of the exemptions available in other states.