In Florida, there exists an exemption in bankruptcy called Tenancy by the Entirety (TBE). TBE is a collection of property that can only exist between a husband and wife where both spouses own and control the entire collection. This property is exempt from creditors who own an individual debt in one of the spouse’s name. However, this property is not exempt from creditors who hold joint debts of both spouses.
When deciding whether to file a Chapter 13 Bankruptcy together with your spouse, there is a new interesting factor to consider. In a recent case, Judge Cristol denied a Chapter 13 Debtor the ability to strip a lien off of his home. Lien stripping is a great benefit of Chapter 13 as it allows an underwater property owner to knock off a second mortgage provided it is fully unsecured.
Previously, lien stripping was something that could only be done in Chapter 13. However, a recent opinion from the 11th Circuit has changed that rule. Here, a Chapter 7 debtor in Georgia sought to strip off a second mortgage that was totally unsecured. The 11th Circuit reversed the Bankruptcy Court and found that the lien could be stripped off pursuant to the plain language of the Bankruptcy Code.
When you “surrender” assets or belongings in Chapter 7 Bankruptcy, you’re doing nothing more than indicating a willingness to let it go. You’re not actually giving it away to anyone. By filing for Chapter 7 Bankruptcy, you are attempting to discharge your obligation to pay certain debts. In return, you agree to surrender property that is not classified as “exempt” under the bankruptcy laws as applied in Florida.