Florida Bankruptcy Law Blog

An Alternative Attack On Florida Homestead

Most people think the main impact of the new bankruptcy law upon Florida homestead protection is the $125,000 limitation on the exemption for debtors who acquired equity in their home within 40 months of filing bankruptcy. I am involved in a case where another feature of the new bankruptcy law is being used to attack the debtor’s homestead exemption. A new Section 522(q)(1) of the Code provides that a debtor may not exempt more than $125,000 of homestead equity regardless of when he acquired the homestead if the debtors owes a debt on account of a criminal act, an intentional tort, reckless misconduct or a civil remedy under RICO laws. Civil fraud, often alleged in civil complaints, falls within the category of intentional tort.

If a creditor files a claim which alleges a debt arising out of the these above categories the debtor would have to object to the claim and defend the allegation in a separate bankruptcy adversary proceeding in order to protect homestead equity above $125,000. If the debtor owned a homestead jointly with a spouse the protected equity would probably rise to $250,000. Creditors could gain leverage against bankruptcy debtors by basing claims on the wrongs listed in Section 522(q)(1).

posted by Jonathan Alper, asset protecton and bankruptcy attorney, Orlando, Florida

Bankruptcy of A LLC Member

An attorney asked me about a prospective bankruptcy client who owned one-third of a Florida limited liability company. The client was sure that their filing bankruptcy would automatically terminate the LLC. The LLC did not have an operating agreement.

Where an LLC does not have a written operating agreement the LLC operates under default provisions provided by Florida Statutes. Florida Statute 608.411 (2) provides that as long as there is at least one remaining LLC member, the bankruptcy, death, expulsion, retirement or resignation of a member , or any other event that terminates the continued membership of that member shall not cause the LLC to be dissolved. Therefore the bankruptcy of a LLC Member does not dissolve the LLC as long as there remains at least one member in good standing.