Recent federal bankruptcy amendments limit the state homestead exemption to $146,450 if you purchased your residence within the 40 months preceding bankruptcy. You must also have lived in that state for 730 days. This new bankruptcy amendment prevents debtors from last minute 'forum shopping' to evade creditors, by using their exposed assets to buy expensive homes immediately before filing bankruptcy. Still, many people continue to move to Florida to buy expensive homes that are fully protected. The new bankruptcy law leaves several issues unsettled. If you sell one homestead home and use the proceeds to buy another home, does the 40 months start anew? Can you safely use your exposed cash to reduce your home mortgage within the 40 months? Can you safely use the cash to improve your home? These and similar issues concerning the scope of homestead protection await court rulings at both the state and federal levels.
