Like the judgment liens in Farrey and Owen, your client’s lien does not satisfy the §522(f)(1) fixing requirement because it was a preexisting floating judgment lien which attached to the debtor’s property interest simultaneously with the acquisition of it. Fla. 1985). Scope of the Debtor Protection. Protecting Your Rights to Homestead Property You should consult an experienced Florida divorce lawyer to help you navigate the intricacies of property sharing during the court proceedings. These low limits don’t apply if a debtor has claimed a Florida homestead for at least 40 consecutive months prior to filing for bankruptcy. . These three requirements give lienholders three bases on which to argue that §522(f)(1) does not allow avoidance of their liens. People anticipating substantial civil judgments often move from other states to Florida to become a Florida resident for asset protection purposes. 31 Id. A judgment lasts for up to 20 years. Terms & Conditions Starting with Florida, we need look no further than to the state's constitution. the cost of materials and labor used by a contractor to improve or repair the homestead property). 11 Boyd, 741 F.2d at 1114. Florida homestead law protects a Florida resident’s primary home from levy and execution by their judgment creditors. X, §4 exempted homestead property from forced sale and provided that no judgment or execution would be a lien thereon. © Copyright 2020 Asset Protection Attorney Wayne Patton. Again, this is why consulting with an estate planning attorney for your estate plan is valuable because the attorney will point out that the way the homestead property is being devised will cause it to be subject to the claims of creditors. Florida is one state that has historically had an unlimited homestead exemption, which never allowed a creditor to take a home in satisfaction of a debt — regardless of the home’s value, though there is acreage limitation and a length of ownership requirement. M.D. at The Florida homestead exemption is unlimited. Interestingly, proceeds from the sale of Florida homestead are also protected to the extent that they are intended to be used for the purchase of a new Florida homestead within a reasonable time. S.D. Florida's debtor protection homestead provision is one of the broadest in the United States.The value of the property that can be protected is unlimited, so long as the property occupies no more than one-half acre (2,000 sq m) within a municipality, or 160 acres (650,000 sq m) outside of a municipality. homeowner association or condominium association fees), mortgages, or mechanic’s liens (e.g. See the next section of this article for an explanation of the fixing requirement. Under the caselaw, to many practitioners’ surprise, a different result is indicated. Likewise, property held in a Florida land trust may qualify as a Florida homestead. M.D. The issue was whether proceeds from the sale of a debtor’s homestead retain their Article X, Section 4 Florida constitutional protection against a writ of garnishment when the funds were divided into multiple accounts, including a brokerage account investing in mutual funds and stocks? This Supreme Court decision leaves little room for argument that an enforceable lien does not impair an exemption of the debtor. N.D. Texas 1991). Finding that the homestead protection provision in the state constitution should be *liberally construed,* the Florida Supreme Court held that homestead protections against judgment creditors extend to the proceeds from the sale of the homestead if all the following conditions are met: In California, for instance, a homestead exemption is available if: News at 6087-88 (1978). 285 (Bankr. 1984), reasoned that a divorce decree lien on the ex-spouse debtor’s homestead was equitable rather than judicial because it was merely a remedy to enforce the ex-spouse lienholder’s pre-existing property right in the marital home.11, At least one district court in Florida has adopted this approach, holding that §522(f)(1) did not apply to an “equitable” lien imposed by a Florida divorce court. 6 Bessemer v. Gersten, 381 So. 2d 1344, 1348 (Fla. 1980). Homestead protection attaches immediately upon the first day of occupancy of a property that is intended to be a permanent Florida homestead. Art. There is considerable room to argue that §522(f)(1) does not apply to a particular lien on a debtor’s exempt homestead property. Of course, there are exceptions to this rule. The court reasoned that “Congress did not intend through section 522(f). §522(b), Florida has opted out of the federally defined exemptions from the bankruptcy estate. Ct. 1833 (1991). Many Florida judicial lien creditors and debtors reading the text of §522(f)(1) would conclude that it allows a debtor in bankruptcy to avoid any judicial lien encumbering the debtor’s homestead property since Florida has declared homestead property to be exempt from the bankruptcy estate.8 Judicial lien creditors should not give up the fight yet, however. Therefore, almost any lienholder can argue that its lien on the debtor’s homestead should not be avoided under §522(f)(1), either because it did not fix on a property interest of the debtor, or because it does not impair the debtor’s homestead exemption. Article X, Section 4 of The Florida Constitution states that homestead property in Florida is “exempt from forced sale under process of any court.” This means that judgment creditors cannot levy and execute on property that falls within the definition of a Florida homestead. The nondischargeable debt in In re Stebbins, 105 B.R. . S.D. art. Thus, under Florida law, the judgment lien attached to the property when the debtor acquired it and remained enforceable even after the property became homestead. 1992), cert. 33 Id. 1) The lien is not a judicial lien. Worse still, the judgment debtor has filed a bankruptcy petition and moved to avoid the lien your recorded judgment appears to create on his or her homestead.1. Does Florida's homestead exemption protect against creditor judgments both from before and after the exempted home was bought? Seemingly as a matter of policy, both courts protected the ex-spouses’ liens and avoided conflict between §522(f)(1) and the state divorce decrees by terming these liens equitable rather than judicial. For example, both the Eighth and 10th circuits have precluded §522(f)(1) avoidance by finding liens imposed by divorce decrees to be equitable, rather than judicial, in nature.9 Both courts were confronted with bankruptcy debtors trying to use §522(f)(1) to avoid liens in favor of their ex-spouses. If you cannot obtain consents you may set the petition for sale of homestead for hearing with notice to all persons stated above. This is known as the homestead protection law. The Ewiak court noted the contradiction in letting stand a nondischargeable debt but discharging the lien securing that debt. See also In re Valdes, 81 B.R. S.D. S.D. Your client calls and says that the defendant, an individual, has just purchased a new parcel of real property in an adjoining county where you (with obvious foresight) have recorded the judgment. 1 This hypothetical fact situation assumes that the judgment was recorded sufficiently in advance of the bankruptcy filing that the trustee cannot avoid it as a preference under 11 U.S.C. sets forth the infamous exemption: Because the lien will have attached to the property after the debtor acquired it, it usually will be subordinate to the homestead exemption.46 As discussed above, the holder of a presently unenforceable lien can argue that it does not impair the debtor’s homestead exemption since the lien will not preclude the debtor’s s exercise of his or her homestead rights. There is no formal requirement that any forms or other paperwork be filed, though you can file a “declaration of domicile” with a local court in your county. This definition also subordinates the homestead exemption to certain other liens not relevant here. 789 (Bankr. If a Florida resident’s primary home qualifies for homestead protection as described above, then if a creditor sues the homeowner and gets a judgment against the homeowner, that judgment cannot attach to the home (or the proceeds of the home). Ct. 1833 (1991), federal courts in Florida disagreed on whether certain judicial liens impaired a debtor’s homestead exemption. Fla. 1988), rev’d, 1989 U.S. Dist. Fla. 1989) (vendors’lien); In re Piambino, 45 BR. 1837-38. The prior judgment will take priority over your claim of homestead in that scenario, so it would be wise to buy and occupy a homestead in another county. Rep. No. For example, if your sister owns half of a home but does not reside in that home with you, your sister’s one-half interest is not protected by the Florida homestead exemption and can, therefore, be sold to satisfy a judgment against her. One section of the declaration imposed a lien on the property for payment of assessment fees. at 213. Second homes and investment properties don’t qualify for protection either. At first glance, this does not appear to be a good argument for the lienholder. & Admin. In addition, a pre-existing civil judgement that is recorded in the same county as a homestead before you occupied the property will take precedence. 1836. within the city limits), including all improvements (i.e. 691 (Bankr. However, under the line of cases set forth above, it is important for the judgment creditor not to assume that all is lost when the debtor files bankruptcy. Thus, the entire value of large estate homes and farms can be protected under Florida’s homestead laws. Joint ownership of property with a person who does not reside on the property can also jeopardize homestead property. Homestead protection is guaranteed under Article X, Section IV of the Florida Constitution and it covers 100% of the real property value of up to 160 contiguous acres in any … 5 See also Allison on the Ocean, Inc. v. Paul’s Carpet, Inc., 479 So. 1983), and In re Hall, 752 F.2d 582 (11th Cir. The creditor sued the Cuneos in Florida seeking a declaratory judgment that the Cuneos’ transfer of funds to purchase the Florida homestead was fraudulent because the Cuneos were attempting to take advantage of the Florida homestead exemption to hinder, delay and defraud present or future creditors by transferring their assets into the Florida property. 45 Id. Finally, two courts have refused to avoid concededly judicial liens on the ground that the underlying debts secured by the liens were nondischargeable in bankruptcy. 47 Of course, actual collection of the debt is a potential problem beyond the scope of this article. Property that is not occupied by the owner is not protected under Florida’s homestead laws. Ga. 1989). 23 Fla. Const. Before the Supreme Court’s recent decision in Owen v. Owen, 495 U.S. 929, 111 5. However, the meaning of “fixing.. . 42 Id. 9 In re Borman, 886 F.2d 273 (10th Cir. A judgment lasts for 20 years which means that the person who obtained the judgment can collect on that judgment until it is fully paid for 20 years after it is filed with the clerk. A similar controversy existed over the §522(f)(1) avoidability of judicial liens presently enforceable against a debtor’s homestead property. In most cases, states that have unlimited homestead exemptions apply the exemption to both attachment of a judgment lien to the homestead as well as to forced judicial sale of the homestead. 41 Id. 36 See note Judgments. to provide a federal exemption greater than that protected by state law where the exemption is created by state law.”27 The purpose behind §522(f) was to dissuade creditors from bringing legal action against debtors when they sense impending bankruptcy. However, under the line of cases set forth above, it is important for the judgment creditor not to assume that all is lost when the debtor files bankruptcy. For example, if a civil judgment is recorded against you in Walton County and, after the judgment is recorded, you buy and occupy a residence in Walton County, you will not be protected. In other words, a judgment creditor of a non-resident co-owner of property can force the property to be sold at auction, so it is smart to make sure that homesteaded property is occupied by all owners of the property. 20 In re Calandriello, 107 B.R. 1989), the court expressly characterized a lien as equitable, rather than judicial, on the ground that the debtor ex-spouse would be unjustly enriched if allowed to avoid a judicial lien under §522(f)(1).10 The court in Boyd v. Robinson, 741 F.2d 1112 (8th Cir. 27 Owen v. Owen, 877 F.2d 44, 47 (11th Cir. The Bland court, therefore, declined to decide whether state exemption definitions may affect the operation of the federal statute §522(f)(1). X, §4. Wayne Patton JD, LLC Fla. 1989). Article X, Section 4 of the Florida Constitution states that a judgment creditor cannot force the sale of your home to satisfy the creditor’s money judgment. The Florida Constitution grants unlimited homestead protection against judgment creditors to any Florida resident regardless of length of residency. 16 Id. Call us: (877) 727-1092 Homestead protection does have a cost. In Owen, the judgment creditor recorded her lien against the debtor in 1976—eight years before the debtor acquired the subject property. at 1838. Ct. 1833 (1991); see also Goodwin, 82 B.R. She received a B.A., with honors, in 1989 from Duke University, and a J.D., with high honors, from the University of Florida in 1992. This article also does not deal with the issues involved in claiming, postbankruptcy, that the debtor’s purported “homestead” is not “homestead” at all under Florida law, and is thus not exempt from your client’s judgment lien. In In re Borman, 886 F.2d 273(10th Cir. at 374 (Bankr. In all of these cases, it can be argued that the liens preexisted the judgments, Because the judgments merely enforced, rather than created, the liens, they did not change the character of the independently existing statutory or consensual liens. Bankruptcy Code §522(f)(1) controls the avoidance of judicial liens on property exempted from the bankruptcy estate. A judgment is an order entered by a judge at the end of a lawsuit. The bankruptcy law also has a 10-year “look back” provision allowing the bankruptcy court to “undo” any fishy contributions made to a homestead within ten years of filing for bankruptcy. ‘To inculcate in its members the principles of duty and service to the public, to improve the administration of justice, and to advance the science of jurisprudence.’ However, these requirements have no bearing on the asset protection features of the homestead exemption. X, § 4(a) of the Florida Constitution, which states that no judgment, decree or execution shall be a lien” on the property defined therein as homestead. 28 Id. Florida also allows judgment liens to be attached to the debtor's personal property -- things like jewelry, art, antiques, and other valuables. Real Estate Owned By Husband and Wife The general rule for a Florida homestead is if both husband … Fla. 1990); In re Watson, 116 B.R. Therefore, it focused solely on whether the pre-existing lien “‘impair[ed] an exemption to which [the debtor] would have been entitled.. . Unfortunately, the Supremacy Clause of the U.S. Constitution trumps Florida’s homestead protection. Whether your homestead is worth $100,000 or $10 million, it is protected against the claims of creditors. 616, Valdes, 81 B.R. Not necessarily, as it turns out, under Florida law regarding attachment of liens and federal law regarding lien avoidance. S.D. Fla. 1985); see also In re West, 54 B.R. 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