The homestead even trumps fraudulent transfer laws to some extent. M.D. 47 Of course, actual collection of the debt is a potential problem beyond the scope of this article. Fla. 1990); In re Bird, 1989 U.S. Dist. However, these requirements have no bearing on the asset protection features of the homestead exemption. 789 (Bankr. 1836. 18 In re Jackson, 86 B.R. 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. Not necessarily, as it turns out, under Florida law regarding attachment of liens and federal law regarding lien avoidance. Joint ownership of property with a person who does not reside on the property can also jeopardize homestead property. 1985), concerning the applicability of §522(f)(1) to Georgia-defined exemptions from the bankruptcy estate. Ms. Freeman is a member of The Florida Bar Journal and News Editorial Board. M.D. However, the meaning of “fixing.. . 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. 8 Pursuant to 11 U.S.C. ‘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.’ The Florida Constitution grants unlimited homestead protection against judgment creditors to any Florida resident regardless of length of residency. S.D. 43 Id. Terms & Conditions In addition, Florida’s Constitution extends the homestead protection to the homeowner’s spouse. Note: the federal bankruptcy law has no application to the unlimited protections offered by Florida homestead laws outside of bankruptcy proceedings. 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. People anticipating substantial civil judgments often move from other states to Florida to become a Florida resident for asset protection purposes. In determining whether the lien or homestead right prevailed, the court held that the lien attached to the property simultaneously with the creation of the purchasers’ interest, but related back to the filing of the declaration. For example, two bankruptcy courts in Florida refused to void under §522(f)(1) mechanics’ and vendors’ liens on exempt homestead property that were enforced by state court judgments.13 The courts reasoned that the lienholders’ having to resort to judicial process against the debtors did not change the character of the statutory mechanics’ lien, or the equitable vendors’ lien. . The Ewiak court noted the contradiction in letting stand a nondischargeable debt but discharging the lien securing that debt. The homestead exemption protects a certain dollar amount of the equity in a debtor’s homestead from judgment creditors. Therefore, the court reasoned, because homestead rights are subject to preexisting liens, the assessment fee lien prevailed over the debtors’ homestead exemption.6 Accordingly, under Florida caselaw, it appears that judgment liens attach to after-acquired homestead property, thus creating the “floating judgment lien” and raising the question of whether a bankrupt debtor can avoid such a lien under Bankruptcy Code §522(f). In order to avoid violating the Florida Constitution, Florida’s Partition Statute (Chapter 64), along with Article X, Section 4 of the Florida Constitution must be followed when it comes to forcing the sale of Florida homestead property. 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. S.D. The viability of these opinions was seriously undermined, however, by In re Bland, 793 F.2d 1172, 1174-76 (11th Cir. 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. disputed the relative priority of their liens on the debtor’s after-acquired property. Florida’s asset protection laws apply to permanent residents of Florida and people in other states who own property in Florida. After a judgment is entered against you by the court, you are called a judgment debtor. 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. 2) The lien does not impair an exemption to which the debtor otherwise would have been entitled. Interest accrues every year as set by the Comptroller of the State of Florida. A judgment lasts for up to 20 years. Fla. 1985). See also F. S. 732.401, 732.4015 (a) There shall be exempt from forced sale under process of any court, and no judgment, decree or within the city limits), including all improvements (i.e. Whether your homestead is worth $100,000 or $10 million, it is protected against the claims of creditors. 251 (Bankr. If you cannot obtain consents you may set the petition for sale of homestead for hearing with notice to all persons stated above. 111 S. Ct. 1833 (1991). 30 Id. 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. Fla. 1989) (vendors’lien); In re Piambino, 45 BR. 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 … There are three discrete requirements for a lien to be subject to §522(f)(1): 1) a judicial lien, 2) must impair an exemption to which the debtor otherwise would have been entitled, 3) because it has fixed on a property interest of the debtor. This is the most simple part of the Florida homestead protection from creditors. Florida defines its homestead exemption as the debtor’s property interest in his or her primary residence, subject to any lien that attached before the property acquired homestead status.23 Because this definition subordinates the homestead exemption to preexisting liens, it renders nonexempt any homestead interest that is subject to a pre-existing lien. “32 The Court endorsed this application of §522(f)(1) to federal exemptions and then reasoned that no basis exists for applying §522(f)(1) differently to exemptions defined by state, rather than federal, law.33. Partition of Florida Homestead Property. These spousal rights exist regardless of any provisions contained in a last will and testament. Thus, the entire value of large estate homes and farms can be protected under Florida’s homestead laws. Scope of the Debtor Protection. Likewise, property held in a Florida land trust may qualify as a Florida homestead. For one, a homestead cannot be sold without the consent of both spouses. Fla. 1991), characterized the lien as equitable rather than judicial because it merely ‘recognized;’ rather than created, the lienholder spouse’s property interest in the debtor spouse’s home.12, This analysis, focusing on whether a lien is judicial in nature, also has been applied outside the context of a divorce decree. At first glance, this does not appear to be a good argument for the lienholder. 855 (Bankr. 45 Id. Therefore, it focused solely on whether the pre-existing lien “‘impair[ed] an exemption to which [the debtor] would have been entitled.. . 44 Owen v. Owen, 961 F.2d 170 (11th Cir. Similarly, a bankruptcy court in Texas found a lien imposed by a state court judgment according to the terms of the parties’ settlement agreement to be consensual, rather than judicial.15 After being sued on a debt owed to the lienholder, the debtor had agreed to entry of a judgment against him in a certain amount and assigned to the lienholder an interest in the proceeds of the sale of his homestead to pay the amount of the judgment. This common understanding is based on the language of Art. Fla. 1989), rev’d, 877 F.2d 44 (11th Cir. A similar controversy existed over the §522(f)(1) avoidability of judicial liens presently enforceable against a debtor’s homestead property. Indeed, the Court noted that permitting lien avoidance in the latter situation would allow judgment debtors to defraud judicial lienholders by conveying their encumbered interests to prospective bankruptcy debtors.42 On the basis of this reasoning, the Court precluded the §522(f)(1) avoidance of a judgment lien that attached simultaneously with the debtor’s acquiring the interest. To be presently enforceable on a debtor’s homestead, a lien must have attached either before, or simultaneously with, the debtor’s acquisition of an interest in the property. X, §4(a)(1), Fla. Const. at 1829. (quoting HR. 1989); Boyd v. Robinson, 741 F.2d 1112 (8th Cir. “Since [the debtor] never possessed his interest before the lien ‘fixed,’ §522(f)(1) is not available to void the lien?”43, The Farrey Court’s analysis gives a judicial lienholder a third possible basis for arguing that the lien should not be avoided under §522(f)(1). Florida homestead laws are notorious among creditors for protecting debtors’ assets, particularly in combination with the protection provided by bankruptcy. 11 Boyd, 741 F.2d at 1114. Your client is out of luck, right? Noting that this lien would prevail over the homestead exemption outside bankruptcy, the 11th Circuit held that the debtor could not avoid the lien in bankruptcy through §522(f)(1). ~ From the Rules Regulating The Florida Bar, Nancy S. Freeman and James Edward Cheek, III, The American Influence on International Commercial Arbitration: Doctrinal Developments and Discovery Methods. at 251. at 793. The Bowers analysis finds support in the Florida Supreme Court decision Bessemer v. Gersten, 381 So. That myth is false. 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. Under the caselaw, to many practitioners’ surprise, a different result is indicated. Unfortunately, the Supremacy Clause of the U.S. Constitution trumps Florida’s homestead protection. at 244. 2d 1344, 1348 (Fla. 1980). Florida homestead laws are notorious among creditors for protecting debtors’ assets, particularly in combination with the protection provided by bankruptcy. Twitter: @MWProtect Real Estate Owned By Husband and Wife The general rule for a Florida homestead is if both husband … However, you discover, the judgment debtor is claiming that the newly purchased realty is the judgment debtor’s homestead. This Supreme Court decision leaves little room for argument that an enforceable lien does not impair an exemption of the debtor. N.D. Fla. 1988); In re Bird, 84 B.R. Because the floating judgment lien attached simultaneously with the creation of the debtor’s property interest, the court reasoned that the lien did not “fix on an interest of the debtor,” as Farrey defined it. If the judgment debtor sells the property and fails to fully convert the proceeds into another qualifying homestead, the sale proceeds would be subject to the judgment lien and, therefore, to collection. This is a strong argument for recording judgments as soon as possible, in order to create floating judgment liens that will attach to after-acquired property. Fla. 1990); In re Brewer, 117 B.R. N.D. Texas 1991). S.D. 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. 329 (Bankr. The Owen court held that liens enforceable under Florida homestead law could not be avoided under §522(f)(1). In Bowers, the judgment debtor claimed a homestead interest in property which he acquired after the judgment holder had recorded his judgment lien.3 The Third District held, “the claimed homestead right (if proven) and the judgment lien would attach to the property simultaneously upon the [debtor’s] acquiring ownership thereof.”4 Despite the constitutional language that no judgment shall be a lien” Bowers indicates that a judgment recorded prior to acquisition of a homestead interest in fact attaches as a lien to the property when the debtor acquires an ownership interest in the property.5. Owen does not control this situation, and decisions cited in the margin give ample basis to argue that a presently unenforceable lien does not impair the homestead exemption.35 As some courts already have reasoned, the existence of an unenforceable lien does not interfere with the debtor’s exercise of his or her homestead rights.36 Therefore, the lien should remain on the property— enforceable if the property ever loses its homestead status.37, 3) The lien did not fix on a property interest of the debtor. Because these courts found no impairment of the homestead exemption, they concluded that §522(f)(1) avoidance was not available.19 Other courts reached the opposite conclusion, allowing §522(f)(1) avoidance of unenforceable liens on homestead property because “the mere existence of the judgment lien does impair the Florida constitutional homestead exemption.”20 These courts found a present impairment of the homestead exemption in the fact that the liens later could become enforceable if the property ceased to be homestead.21 In addition, they found impairment in the practical problems created by even an unenforceable lien on property. 24 In re Owen, 86 B.R. Surrounded the intent to help them remove a homestead exemption is … 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: 141 (Bankr. 16 Id. The courts confirm that the Florida Constitution protects the homestead against every type of claim and judgment except those specifically mentioned in the constitutional provision itself, and that other than for the purposes stated in this provision, cannot be waived, observing that protection of homestead from alienation cannot be waived by contract or otherwise. 527, 528 (Bankr. 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. 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. However, apparently unnoticed by the Hampton court, the Ewiak court held that this “unpalatable result” was a matter for Congress to address and avoided the lien under §522(f)(1). 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. S.D. A creditor who obtains a judgment against you is called a judgment creditor. © Copyright 2020 Asset Protection Attorney Wayne Patton. Reasoning that it would be incongruous to avoid a lien but not discharge the underlying debt, each court refused to avoid the lien being considered under §522(f)(1).17. 691 (Bankr. buildings) on the land, or a personal residence on up to 160 contiguous acres in any county, including all improvements. 4 Id. These courts avoided pre-existing liens despite the fact that Florida had defined its homestead exemption to be subordinate to such liens.25 They reasoned that the Supremacy Clause of the U.S. Constitution required the federal statute §522(f)(1) to prevail over the Florida Constitution’s definition of the homestead exemption.26, This uncertainty surrounding the issue of the use of §522(f)(1) to avoid judicial liens on Florida homestead property set the stage for the 11th Circuit’s decision in Owen v. Owen, 877 F.2d 44 (11th Cir. Therefore, Florida law determines what property a debtor may exempt from the bankruptcy estate. S.D. X, §4 exempted homestead property from forced sale and provided that no judgment or execution would be a lien thereon. Fla. 1985); see also In re West, 54 B.R. There is some Florida case law holding that property held in a revocable living trust may qualify for homestead protection. In fact, your client may have a lien which is not subject to avoidance under the Bankruptcy Code, and which may be enforceable if the property to which it is attached loses its homestead character, even if the judgment debtor receives a discharge in the bankruptcy proceeding. Considering a lien on property covered by a federal exemption, lower courts “ask first whether avoiding the lien would entitle the debtor to an exemption, and if it would, then avoid and recover the lien.. . 522(f)(1). This pamphlet describes your right to claim certain exemptions when a judgment has been obtained against you. Bankruptcy Code §522(f)(1) controls the avoidance of judicial liens on property exempted from the bankruptcy estate. 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. 36 See note at 494. 25 See, e.g., Matter of Hershey, 50 B.R. 13 In re Davis, 96 B.R. Upon the death of the owner of a homestead, a surviving spouse is entitled to a life estate on the property, and the remainder interest (e.g. 6 Bessemer v. Gersten, 381 So. The Court buttressed this interpretation by noting its consistence with lower courts’ uniform method of applying §522(f)(1) to federally defined exemptions. the cost of materials and labor used by a contractor to improve or repair the homestead property). at 1830. 1837-38. All rights reserved. A spouse can also elect to take an immediate 50% interest in the property and give the remaining 50% to any children of the owner, but this election must be made within six months of when the homeowner died. §547. 343. Of course, there are exceptions to this rule. 42 Id. 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. Lexis 17397 (S.D. If there is a judgment only against your spouse and not yourself, you are entitled to claim an exemption your interest in the property. One section of the declaration imposed a lien on the property for payment of assessment fees. 712 (Bankr. M.D. M.D. 1986) (en banc). The courts have liberally construed these provisions and have extended homestead protection to condominiums, manufactured homes, and mobile homes, which seems to imply that homestead protection is available for any and all fixtures to real property that qualifies for the exemption. Conclusion 35 See note 17 and accompanying text. Finally, a spouse can waive his or her homestead rights, but minor children are always entitled to their rights (i.e. A judgment creditor (such as, for example, a bank that obtains a judgment against the homeowner for not paying a credit card balance) cannot, under current Florida law, force the sale of a person’s homestead property, by levying against the home. Florida homestead law protects a Florida resident’s primary home from levy and execution by their judgment creditors. at 172. 1989), rev’d, 500 U.S. 305, 111 5. S.D. 20 In re Calandriello, 107 B.R. In fact, debtors will not be able to avoid under §522(f)(1) any floating judgment lien that attached to after-acquired homestead property because the lien will have attached simultaneously with the debtor’s acquiring the interest. The homestead exemption will not protect your property from tax liens, pre-existing liens (e.g. Homestead protection does have a cost. James Edward Cheek III is a shareholder of the firm of Winderweedle, Haines, Ward and Woodman, P.A. Locklar, 35 So. 19 See, e.g., Jackson, 86 B.R. 1989). 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. 14 Davis, 96 B.R. 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. 2 The U.S. Supreme Court recently recognized the viability of “floating judgment liens” in United States v. McDermott, __ U.S. __ 113 S. Ct. 1526, 61 U.S.L.W. 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. 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. Fla. 1984) (mechanics’ lien). 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. What liens or judgments are considered "non-equity"? Ga. 1989). © 2020 The Florida Bar. medical bills, credit cards, child support, nursing home, judgement from lawsuits, etc. Starting with Florida, we need look no further than to the state's constitution. 126-27(1977), U.S. Code Cong. 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. ‘ “31 The Court examined the statutory language “would have been entitled” and reasoned that it must refer to an exemption the debtor would have enjoyed but for the lien at issue. 25 See, e.g., Hershey, 50 B.R. A lien fitting this description will be found nonavoidable under §522(f)(1) on the ground that it did not fix on an interest of the debtor. Id. Florida Constitution Article X, Section 4, Homestead; exemptions. 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. sets forth the infamous exemption: & Admin. This section provides: ‘Not-withstanding any waiver of exemptions, the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled. Rather, they must remain separate (ideally in an account designated as “homestead funds”) until they are used to purchase a new Florida property. Ct. 1833 (1991). 28 Id. 41 Id. 211 (Bankr. In In re Borman, 886 F.2d 273(10th Cir. One of the allowed exemptions in Florida is homestead property. M.D. 9 In re Borman, 886 F.2d 273 (10th Cir. An informal poll of Florida lawyers would probably reveal a consensus that judgment liens do not attach to homestead property. Therefore, the 11th Circuit held, §522(f)(1) was not available to void the lien.45. Olesky v. Nicholas, supra. What we do: We offer Maximum Protection for your Florida Home against the all non-equity Judgments, Liens, Attachments, Lawsuits from lienors. The Florida Constitution grants homestead protection to a personal residence on up to one-half acre within a municipality (i.e. at 1022-23; Piambino, 45 B.R. 118 (S.D. at 15 In re Inman, 131 BR. The intent of the owner/occupier of the home is by far the most important factor in determining whether a property is a qualified Florida homestead. Some courts confronted with judicial liens that attached to property after it became homestead refused to allow §522(f)(1) avoidance.18 These courts reasoned that the liens did not impair the debtor’s homestead exemption because they could not be enforced against the property while it remained homestead. 27 Owen v. Owen, 877 F.2d 44, 47 (11th Cir. creditors. As illustrated above, the creditor may benefit from closely examining the circumstances surrounding a §522(f)(1) motion to avoid lien filed in the debtor’s bankruptcy case. The Court recognized that the judgment creditor’s floating judgment lien attached to the property in question when the debtor acquired an interest in the property. art. Ct. 1833 (1991), federal courts in Florida disagreed on whether certain judicial liens impaired a debtor’s homestead exemption. But see Jones v. Carpenter, 106 So. 837 (Bankr. 1981), was decided under Florida’s 1885 Constitution, which like current art. Second homes and investment properties don’t qualify for protection either. 285, 287 (Bankr. Florida has one of the best Homestead Protections in the Country. 1989), rev’d, U.S. M.D. That’s true even if the homestead is titled in only one person’s name and even if it was bought entirely with money that is or was separate property. 1) The lien is not a judicial lien. Privacy Policy. A few courts have resolved conflicts between state laws and §522(f)(1) by focusing on the ‘judicial lien” requirement of § Therefore, some courts held, the pre-existing lien does not impair an exemption established by Florida law, as required for avoidance under §522(f)(1).24 In contrast, other courts reached the opposite conclusion regarding the avoidability of these enforceable liens. Nancy S. Freeman is an attorney with Winderweedle, Haines, Ward and Woodman, P.A., and practices with the firm’s litigation group in the Orlando office. The court found the resulting lien to be more like a consensual security interest than a judicial lien because it originated from the voluntary settlement agreement, even though that agreement was enforced by a judgment. 113 S.Ct. Lexis 17397 (S.D. 7 1 1 U.S.C. Accord, In re Bradlow, 119 B.R. art. §552(f)(1) (1988). 243 (Bankr. 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