Tenants By Entireties Under New Bankruptcy Law

The new bankruptcy law effective October 17, 2005, makes it much harder for people to move to Florida and proceed immediately to file bankruptcy. Under the new law a person has to be resident of Florida for two years to take advantage of Florida’s liberal bankruptcy exemptions. There is no waiting period for protection against civil judgments outside of bankruptcy court. There is an important exception to the two year waiting period for Florida exemption protection in bankruptcy, and that exception is the protection afforded to assets owned jointly by husband and wife as tenants by entireties when just one spouse files bankruptcy

Florida common law, established over the years by consistent court decisions, holds that property owned by spouses jointly as tenants by entireties is protected from the creditor of just one of the spouses. Tenancy by entireties is not a statutory protection from creditors; it is a common law protection that is based on how Florida courts define marital property. The two year waiting period for bankruptcy exemptions under the new bankruptcy law applies to Florida’s statutory exemptions, but the waiting period does not apply to how Florida or any other state defines property interest and the consequences of property concepts for creditor collection. Therefore, as soon as a person becomes a Florida resident his property interest are defined under Florida law. Bankruptcy law respects the property laws of individual states. Therefore, even under the new bankruptcy law, a married debtor who moves to Florida and purchases jointly owned property with his spouse should have such joint entireties property protected in bankruptcy regardless of when he files for bankruptcy protection.

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