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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 … Property that is not occupied by the owner is not protected under Florida’s homestead laws. 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. Rep. No. the cost of materials and labor used by a contractor to improve or repair the homestead property). Ms. Freeman is a member of The Florida Bar Journal and News Editorial Board. Florida also allows judgment liens to be attached to the debtor's personal property -- things like jewelry, art, antiques, and other valuables. Olesky v. Nicholas, supra. That myth is false. 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). 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. The Bowers analysis finds support in the Florida Supreme Court decision Bessemer v. Gersten, 381 So. 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. Therefore, it focused solely on whether the pre-existing lien “‘impair[ed] an exemption to which [the debtor] would have been entitled.. . at 1831. M.D. M.D. M.D. 1981), was decided under Florida’s 1885 Constitution, which like current art. Fla. 1990); In re Watson, 116 B.R. at 494. Fla. 1989). 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. Returning to the hypothetical at the beginning of this article, it is apparent that your client’s judgment lien is not avoidable under §522(f)(1). For example, title companies often treat these judgments as clouds on title and refuse to insure title to the property.22 These courts, therefore, allowed §522(f)(1) avoidance of presently unenforceable liens on homestead property. Twitter: @MWProtect See also In re Valdes, 81 B.R. den., ___ U.S. 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. 23 Fla. Const. 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. 34 Id. Your client is out of luck, right? The homestead even trumps fraudulent transfer laws to some extent. at art. ‘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.’ See the next section of this article for an explanation of the fixing requirement. 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. All rights reserved. . 45 Id. You think things are looking up. Florida Statutes exempt many types of assets from creditor execution. A creditor who obtains a judgment against you is called a judgment creditor. 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. at 172. 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. The Hampton court purported to follow and adopt the reasoning of In re Ewiak, 75 B.R. However, as a practical matter, this inequity will be remedied by the “fixing” requirement of §522(f)(1). 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. The Third District Court of Appeal faced the issue of whether floating judgment liens attach to after-acquired property in Bowers v. Mozingo, 399 So. 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. Therefore, the Court concluded that Florida’s exclusion of preexisting liens from the scope of its homestead exemption does not affect §522(f)(1) avoidance of those liens in bankruptcy.34 Even though a lien may fall outside the scope of an exemption, it will be found to impair” the exemption if avoidance of the lien would render the debtor’s encumbered interest exempt. Not necessarily, as it turns out, under Florida law regarding attachment of liens and federal law regarding lien avoidance. The homestead exemption is the highest form of asset protection because it is embodied in Florida’s Constitution and statutes, and it has been rigorously and consistently upheld by the courts. 712 (Bankr. Id. (S.D. 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). Under the caselaw, to many practitioners’ surprise, a different result is indicated. , property held in a Florida resident for asset protection purposes jeopardize homestead property is exactly is `` homestead of... 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