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Old School Bankruptcy Exemption Gets a Modern Facelift

A Victory for Florida Debtors.

There was a recent change to Florida law that benefits the vast majority of individuals filing for bankruptcy protection in Florida. Specifically, the change in law provides a long-overdue increase to the property exemptions that Florida debtors are able to claim.

What’s an Exemption?

When facing financial hardship, bankruptcy can offer a fresh start. One important aspect of bankruptcy is property exemptions, which allow you to protect certain assets from creditors. Understanding exemptions is crucial when considering bankruptcy, as they can help you preserve essential items and maintain a basic standard of living. These property exemptions vary by state and can include personal property, such as your home, car, certain financial accounts, and belongings.

In Florida, while there are others, the most common exemptions claimed by debtors are for their homestead property, household goods and personal belongings, and a motor vehicle. Historically, Florida debtors were able to exempt a motor vehicle, but only up to the amount of $1,000. This $1,000 exemption first went into effect in 1993, but had remained unchanged since.

Time, Money & Cruelty

The $1,000 exemption was established in an era when the average used car could be purchased for a fraction of today’s prices. But even thirty years ago in 1993, when the law first went into effect, $1,000 didn’t get you much, car-wise. Twenty years ago, the $1,000 exemption was laughable. Ten years ago, it was insulting. In 2024, a motor vehicle exemption of $1,000 was nothing short of cruel, and seemed more appropriate to exempt a toy car and not a vehicle that is essential for the support of a debtor’s family.

This frustratingly-low figure often left many Floridians feeling vulnerable in the face of financial hardship. I’ve had countless discussions with clients of mine about this low exemption amount and the best advice I ever was able to provide was “I’m sorry, it’s the law — talk to your congressman.” Well, apparently, someone finally did.

A Long Overdue Update

The recent amendment to Florida Statutes (§) 222.25, effective July 1, 2024, finally addressed this longstanding issue. Hallelujah! The exemption for motor vehicles has finally been increased, now to $5,000. This provided some much-needed relief to Floridians filing bankruptcy due to financial challenges. This increased property exemption applies in Chapter 7 cases to allow debtors to protect more assets from liquidation by the trustee. The increased exemption can also come in to play in Chapter 13 cases when the “best interests of the creditors” test is in play. Bottom line, this increase to the vehicle exemption is a victory for consumers at a time when consumer victories seem few and far between.

A Step in the Right Direction…

While the $5,000 exemption is a substantial and long-overdue improvement, it’s important to acknowledge that it may be a temporary fix. Just as we saw to the figure that went into effect 30 years ago, it’s certain that it’s a question of when, and not if, the exemption needs to be adjusted in the future. Fast forward 30 years from now and I can see Gen-“fill-in-the-blank” lamenting about how easy we all had it in the 2020s when cars cost “nothing” and we got a whopping $5,000 exemption, but their cars cost $100,000 and yet they still get the same $5,000 exemption.

To prevent this, the Florida legislature really should have added a provision in the amended statute to include self-effectuating inflation adjuster to the motor vehicle exemption amount. This would ensure that the exemption keeps pace with rising prices, providing ongoing protection for Florida motorists and preventing our future generations from suffering the same fate that Florida debtors have suffered for decades.

Talk to your congressman.

old school exemption gets a facelift battaglia.law

Battaglia Law, PLLC