Allow me to put this in context. The Bad News: You have lost your job, or had to take a lower paying job. The Good News (or so you think): Before you lost your income, or as part of a severance package, you received a lump sum of money, you took money from a retirement account and paid off the car, or you saved every dime you could while working to set money aside for that rainy day that is finally here.
Well where to spend it? We’ll pay off the car so at least we have transportation. After all this is Florida. Public Transportation is ineffective at best. At worst, you cannot get from your home to work unless you leave hours and hours ahead of your time to be at work. The truth of the matter is, in Florida, you need a car to get around.
Finally there comes a day when money going out overwhelms money coming in and now filing bankruptcy in Florida is your only option. No problem, we do not have much, but we have our two cars – one for mom to get to work and one for dad to get to work. Or at least two cars so one can go to work and one can take kids to school. Whatever the scenario, at least we have our cars to get around.
Not so fast in Florida bankruptcies. The exemption in Florida for someone filing bankruptcy for an automobile is limited to $1,000.00. When someone files for Bankruptcy in Florida, all of your property is placed in the hands of the Bankruptcy Trustee. All of your debt is placed in their hands too. Now you begin to exempt property and take it back, using the Florida bankruptcy exemptions.
Problem: The Florida automobile exemption is as archaic as the inquisition.
Example: Your car has a value of $6,000.00; your spouse’s car has a value of $5,000.00. You owe NO money on the cars. You have $11,000.00 of equity in the cars. In Florida, you get to ONLY keep $1,000.00 per person of that equity. Therefore, you are faced with having to “buy back” from the bankruptcy trustee the other $9,000.00 of equity.
You have no job, or have taken a serious cut in pay. You have to buy back the equity in 10 -12 months. Do the math that is a payment of $750.00 to $900.00 per month, plus, in some cases, an additional fee to the Trustee of about $10.00 to keep your cars. For a family struggling, this is worse than having to file bankruptcy.
Solution (or so you thought until you spoke with the Bankruptcy lawyer): Florida’s wildcard to the rescue. If you do not own a home, a married couple in the example above can, in some cases, apply the wildcard of $8,000.00 to exempt the cars out and keep them without having to pay for them a second time around. (Note: Depending on how car s titled may affect this solution so speak to an experienced Florida bankruptcy attorney). So in our scenario the $11,000.00 of equity is exempted to the amount of $10,000.00, if applied properly, and the buy back is $1,000.00 – a payment of $84.00 to $100.00 per month, plus the Trustee fee in some cases.
Sounds good, right? Not so fast if you are a homeowner. If you are a homeowner, and you want to keep your house and car, be prepared to pay the $9,000.00 to the Trustee. At the same time you keep paying your house payment, and most likely on a house that is underwater and you owe more on it than it ever will be worth again in your lifetime.
Since a recent decision by the Florida Supreme Court, answering a question from the Federal Courts, this has been the rule. I do not disagree with the rule. I understand it, but to my clients it makes no sense.
The homestead exclusion in Florida was designed to protect your home from creditors. Most people know that, in Florida, generally, you cannot be forced to sell your home to pay a debt, except for three specific scenarios. If you have equity in your home, in many cases that equity is protected. Your Florida judgment creditors, credit card companies or automobile lenders on a repossessed car cannot force you to apply for or obtain a line of credit against the equity in your home to pay back a debt. Of course, very few homes in Florida have any equity in them.
If your home in underwater, nobody wants it, not even your mortgage company. But the Bankruptcy Trustee will, in effect, take it and put you out if you want to keep your car. So we must ask ourselves, where is the protection in a Florida bankruptcy? It does not exist.
Honestly, the Florida Legislature has to ask itself, if our residents have no equity in their homes, there is nothing to exempt. But day in and day out in bankruptcy courts across Florida, people are forced to make the decision: Do I live in my house or do I live in my car? You do not get both in our scenario above.
THE REAL SOLUTION: Fix the personal property and automobile exemption found in the Florida Statutes. Section 222.25(2), the Florida automobile exemption was passed in 1993. In 1993 the average new car was between $14,000.00 and $16,000.00. Today, the average cost is $30,000 - an almost double in price difference. Used cars, back in the 90’s the average used car price was lower as well. At the time the Florida Exemption of $1,000.00 in equity in a car was passed, it was not too bad, not good, but not too bad.
Of course, the Florida Legislature probably looked to the personal property exemption as guidance and the $1,000 personal property exemption had not been changed in over 100 years. The $1,000.00 personal property exemption when it was passed is now worth less than $100.00.
It is time for the Florida Legislature to wake up from their hibernation, and get in line with today’s economic figures. There needs to be an immediate and calculated rise in the automobile exemption afforded to the residents of the State of Florida. Simply put a $1,000.00 equity exemption in an automobile is ridiculous. Raise the level to equate the Florida wildcard and permit $4,000.00 of equity to be kept in a car. Otherwise we will turn into a state of nomads traveling from city to city living in our cars. The homestead exemption when it was passed was and will always be a good thing. The reality is very few Floridians have equity in their homes to protect. Now when they need help the most they are faced with the very real likelihood of walking away from their homes - resulting a flood of homes onto an already horrible housing crisis – in order to keep their car to get to work to try and start a new life. The alternative, keep the home, give up the car – now they cannot get to work. End result: No Transportation, No Income, and No Ability to pay the house payment. Guess what, we are back at the bankruptcy lawyer’s office in Florida.
Far Help with Fling a Florida Bankruptcy, contact Mark Today.
