Florida Bankruptcy Law

A new bankruptcy law signed by President Bush in April changed Florida's homestead exemption protections. A home's value is fully protected from creditors if the owner has lived in it for more than three years and four months. However, anyone who has lived in a state--including Florida--for at least two years but owned their home for less than 3 1/3 years before filing for bankruptcy can only protect up to $125,000 of equity. (A debtor who has lived in a state less than two years prior to a bankruptcy filing must file in the state where he previously lived.) Florida's unlimited homestead exemption still applies for residents who have owned their house more than three years and four months.

Florida has long been notorious for being a debtor's paradise. The state constitution allowed most residents to shield from creditors the full value of their homes, which enticed some wealthy debtors to the Sunshine State.