Home Appreciation Not Subject To Homestead Cap

The new bankruptcy law caps homestead protection at $125,000 for debtors who first acquired a Florida homestead within the past 40 months prior to filing bankruptcy. The American Bankruptcy Institute Blog reports the first case, from a Texas bankruptcy court, which considered whether appreciation in value during the applicable 40 months prior to bankruptcy counts against the cap. Link: ABI's BAPCPA Blog. The case held that only the value of interest acquired by the debtor, excluding appreciation in value, is applicable to the homestead cap.

Consider a hypothetical florida debtor who purchases a homestead for $125,000 41 months before filing. If the home appreciates to $250,000 during the ensuing 40 months, and the debtor then files for Chapter 7 bankruptcy, his homestead will still be exempt in the bankruptcy even though its value is double the amount of the $125,000 homestead cap.

I am not aware of any Florida case which has considered this same issue.

posted by Jonathan Alper, asset protection and bankruptcy lawyer, Orlando, Florida