Relevance of Exemptions in Chapter 13 Bankruptcy

Many Floridians have found that filing for bankruptcy can help address and overcome financial hardship. In fact, there were approximately 45,000 bankruptcy cases filed by Florida residents and businesses in 2017. Moreover, filing for chapter 13 bankruptcy can help people address their financial hardships without losing or relinquishing important property.

In a Chapter 7 Bankruptcy, a debtor’s nonexempt assets are liquidated, and the proceeds used to pay back creditors. In a Chapter 13 case, on the other hand, a debtor enters into a repayment plan that allows him or her to keep his or her property—so long as the debtor stays current on payments under the plan.

It may seem, therefore, that the exemptions are not relevant in Chapter 13—but this would be incorrect. The Chapter 13 “best interest of creditors” test requires that nonpriority unsecured creditors who are involved in a Chapter 13 case receive at least as much as they would have had the debtor filed for Chapter 7. When the test is applied, the bankruptcy trustee determines what property would have been available to pay creditors after the exemptions were applied if the debtor was filing under Chapter 7.

Debtors who file for chapter 13 bankruptcy in the State of Florida must use Florida’s bankruptcy exemptions. Only in limited circumstances will federal bankruptcy exemptions be used. Fortunately, Florida’s bankruptcy exemptions are very favorable to those residents filing for chapter 13 bankruptcy.

To use Florida exemptions, a debtor is required, by Florida bankruptcy law, to have resided in Florida for 730 days prior to having filed his or her petition. A debtor who fails to meet this requirement will not be allowed to use Florida’s bankruptcy exemptions.

Florida’s Homestead Exemption

Florida is, perhaps, best known for its homestead exemption. Often considered as one of the nation’s most generous bankruptcy exemptions, the homestead exemption allows Florida debtors to exempt an unlimited amount of value in their home. In order to benefit from this exemption, a Florida debtor must have owned the property for at least 1,215 days before the bankruptcy filing. Additionally, Florida law limits the size of the property. A debtor will not be able to take advantage of this highly-favorable exemption unless both requirements are met.

Other Bankruptcy Exemptions

Other favorable bankruptcy exemptions are available to Florida debtors. These exemptions may be a bit more nuanced, and it is, therefore, important to seek legal counsel to help you understand which exemptions you qualify for. Some other favorable exemptions that are commonly claimed by Florida debtors include:

  • Wage exemptions
  • Personal property exemption of up to $1,000
  • Motor vehicle exemption of up to $1,000
  • Tax credits and refunds.

Contact A St. Petersburg Bankruptcy Attorney

Florida bankruptcy exemptions play an important role for debtors filing a chapter 13 bankruptcy case. Debtors who take advantage of those exemptions available to them during a chapter 13 case may not only keep their property but also minimize the amount they will owe to creditors during repayment. Still, identifying and understanding what property qualifies for an exemption can be quite difficult and nuanced. Therefore, it is imperative that a debtor seek the advice of experienced legal counsel before filing a chapter 13 bankruptcy case.

Here, at Berkowitz & Myer, we are determined to help you in this difficult time. We will evaluate your property and help you prepare and execute the chapter 13 bankruptcy filing that best suits your situation. Schedule your initial consultation by calling our offices today, at (727) 344-0123.

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