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Tenancy by the Entirety in Bankruptcy and Homestead Exemptions
November 19, 2008
Topic: Bankruptcy
A court has held that under Florida law property held by a married couple under tenancy by the entirety may be exempt if only one of the spouses owes a debt. If both spouses owe a debt, the usual homestead exemptions could protect the home if bankruptcy proceedings are initiated.
In Florida, property held by husband and wife as tenants by the entireties belongs to neither spouse individually, but to both spouses. The property is not limited in size or description. Any property could be held as tenancy by the entirety, not just real estate. When property is held as a tenancy by the entireties, only the creditors of both the husband and wife, jointly, may attach the tenancy by the entireties property. Therefore, the property is not divisible on behalf of one spouse alone, and it cannot be reached to satisfy the obligation of only one spouse. If the both spouses owe the debt, the Florida constitutional homestead protection is more extensive than the protection bestowed by tenancy by the entireties law. For example, only spouses can own property as tenants by the entireties. Any natural person can claim the constitutional homestead protection. Also, joint creditors of the spouses can reach the entireties property, but they cannot reach property that the debtor claims as homestead, unless one of the applicable exceptions applies. The Florida Constitution therefore provides an unlimited and powerful exemption for Florida homeowners, married or not. If the property does not qualify under the homestead exemption, tenancy by the entirety could provide additional protection for property held as tenancy by the entirety.
Estate/asset planning is important in everyday life and is especially important when it comes to families that fall into economic problems. However, there are rules against pledging assets or hiding assets prior to the filing of bankruptcy. In fact, trustees and the courts will examine transfers made the 2 years prior to the filing at a minimum and upon good cause, can look back even further.
We can explore your assets allocations and explain what effect a bankruptcy might have on your estate and assets. Give us a call.
At the Arnold Law Firm, we continue to monitor advances in bankruptcy law. Please contact us to discuss your bankruptcy needs and concerns.
