Protecting The Home When One Spouse Files Chapter 7: New Residents

I received an inquiry from prospective bankruptcy clients who had moved to Florida from New York just over six months and had purchased jointly a Florida homestead. The wife had substantial unsecured debts and wanted to file Chapter 7 bankruptcy. The couple was concerned that their homestead would not be protected under Florida’s homestead exemption in the wife’s bankruptcy because they had lived in Florida less than two years and could not use Florida exemptions.

In the first place, the homestead would be exempt in the wife’s bankruptcy as a tenants by entireties asset assuming the couple had no joint unsecured debts. The homestead exemption is not necessary. This is true because tenants by entireties is not an “exemption” and is not subject to a two-year waiting period like homestead and other Florida exemptions. Tenants by entireties is a common-law property concept which has been applied to exclude T by E property from the debtor’s bankruptcy estate.

Alternatively, even without T by E protection, the bankruptcy trustee could not liquidate the homestead as long as the non-debtor husband lived there. The trustee may assert ownership of the wife’s interest in the property, but that interest would have little value and would be difficult to sell because the owner of the wife’s rights in the property are subject to the husband’s homestead rights.

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