Florida Asset Protection Blog

Florida Residency For In-State Tuition: Rules Are Different

From time to time I receive questions about Florida residency for in-state tuition at Florida universities. Having college age children myself I looked into this issue several years ago. The residency rules for purposes of school tuition for undergraduate and graduate students under the age of 25 are significantly different from the law of residency for asset protection purposes. Just because a person is a Florida resident for purposes of asset exemptions does not mean the same person is a resident for purposes of in-state tuition. Florida has a separate set of rules for tuition residency. Florida’s rules are very similar to the in-state tuition tests in other states. School tuition is beyond the scope of this blog. Those interested in qualification for in-state tuition in Florida should examine those separate rules which are clearly stated on the websites of most Florida colleges and universities.

Homestead Protection Of Multi-Family Property

A common homestead question is whether or not a homeowner can rent out part of a homestead property and retain homestead protection from creditors. A client this past week owned a four unit apartment building which is currently rented to four tenants. He proposed to move into one of the four units and assert homestead protection as to the entire property. I am fairly sure that courts would not extend homestead protection over the entire building. There are several bankruptcy cases which have declined homestead protection to those parts of a property that were physically separate and were used primarily for the production of income. Duplexes where one unit is rented to someone other than an immediate family member, and the other unit occupied by the owner are considered homestead only up to half of the value. Courts do not permit people to convert multi-unit investment properties, such as apartments or motels, to homestead by the owner’s occupancy of a single unit therein.

Liability For HOA Or Condo Association Dues After Foreclosure

Several people who are contemplating voluntary foreclosure have asked me whether they should continue paying their homeowner or condominium dues during the foreclosure process. I have recommended that homeowners stop paying homeowner dues if they are voluntarily surrendering their homes to their mortgage lender. I believed that the homeowners due would be paid by the party who ultimately purchases the property from the mortgage lender in order to clear the HOA’s lien on the property. I have changed my opinion after another attorney pointed out a Florida statute that may impose personal liability for homeowner’s dues. Florida Statute 718.116(1)(a) states that homeowners are personally liable for assessments by a condominium association. Florida Statute 720.3085 states that homeowners are personally liable for assessments by a homeowners association.

I do not practice law in the area of homeowner association law. I am unaware of any condo or homeowner association which has pursued a judgment against a former owner for unpaid assessments or dues after the unit has gone through the foreclosure process. I am concerned about this liability because the condo and homeowner statutes provide for awards of attorneys fees to the association’s lawyers for their collection of unpaid dues and assessments. A relatively small association debt could become a substantial judgment when potential attorneys fees are included. Therefore, the more conservative strategy for someone anticipating foreclosure is to continue paying homeowner’s association dues through the date of sale.

Real estate taxes are different. Tax liability is usually much greater than the amount of association dues, and I am unaware of laws permitting the government to pursue personal liability for unpaid property taxes. I continue to recommend that people who are voluntarily surrendering properties to their mortgage lender through foreclosure not pay real estate tax bills.

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

Does Contract To Sell Homestead Immediately Forfeit Creditor Protection?

A Florida resident's homestead is protected even if he is not residing the house temporarily as long as he intends to return the same property and considers the property to be his primary residence. If and when the facts indicate that the owner intends to abandon the homestead as a primary residence the homestead protection is lost. Abandonment is clear when the debtor sells the homestead property. A Florida bankruptcy court recently considered the question of whether a debtor shows his intent to abandon his homestead when he signs a contract to sell the property. A debtor executed a contract to sell, clearly intending and hoping to sell his homestead and then move, and prior to closing the sale the debtor filed bankruptcy.

The court held that contracting to sell a homestead is not the same as actually selling the property, and therefore, that the sales contract prior to closing does not constitute abandonment. The court cited prior Florida court decisions holding that homestead abandonment is usually shown by the debtor's acquisition of and move in to a new domicile or transfer by deed to a third party. As long as the debtor holds legal title and physically occupies a home the debtor is entitled to homestead protection from creditors and bankruptcy trustees. In re: Vick Case No. 07-10844

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

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Careless Paperwork Can Forfeit Tenants By Entireties Protection

Another attorney told me about a hearing where his client, a judgment debtor, lost $4,000 he had held in a tenants by entireties account because the debtor failed to verify all the documents which were signed when he and his wife opened the bank account. The debtor and his wife together went to their bank to open a tenants by entireties checking account . They signed bank forms. Subsequently, they received written bank statements which were titled as husband and wife, tenants by entireties. A judgment was entered against the husband. The husband’s judgment creditor garnished the joint account, and the creditor issued a subpoena of all bank records regarding the account. The debtor’s attorney filed a motion to dissolve the writ of garnishment on the grounds that it was clearly titled as a tenants by entireties account. The court denied the motion and sustained the creditor’s writ of garnishment.

At the court hearing on the motion to dissolve the writ the judgment creditor produced the debtor’s bank signature card which had boxes to be checked corresponding to different forms of account ownership. On the signature card the only box checked was that for "joint tenants with rights of survivorship." There was a box for "tenants by entireties", but that box was not checked. The creditor argued that the debtors intended account ownership with survivorship, but not as tenants by entireties, because they chose to check the survivorship box in leave unchecked the entireties box. The debtor’s attorney argued that regardless of what box had been checked the bank account was titled as "tenants by entireties" and that the actual title take precedence over what appears on the account application.

The court held that the account was not a tenants by entireties account because the debtors intended to open an account with rights of survivorship based on what they checked on the account application. In my opinion, the debtors’ intent is ambiguous. The Florida Supreme Court has ruled that where the ownership of joint marital accounts is unclear the law presumes that married couples’ financial accounts, and other personal property, is owned tenants by the entireties. The debtor’s attorney is considering an appeal. The small amount of money at stake may prevent this case from being resolved by an appellate court.

This story illustrates how important it is for married couples to pay attention to details when they open financial accounts which they intend to be tenants by entireties accounts.

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

Newspaper States Mortgage Lenders Liberalizing Loan Modifications.

A large proportion of people seeking bankruptcy or asset protection advice are homeowners facing mortgage foreclosure. Up to now, most of my clients report that their mortgage lender and mortgage service company were reluctant to modify mortgage terms and payments although an increasing number of mortgage lenders had eased procedures for short-sale approval. This past Saturday’s Wall Street Journal had two articles about mortgage lenders’ new programs to help homeowners avoid foreclosure by mutual modification of mortgage terms. Examined closely, these new programs, while welcome, apply to a limited segment of homeowners with problem mortgages and upside down houses. J.P. Morgan Chase is the first bank to make an ambitious effort to modify their clients’ problem mortgages. J.P. Morgan took over the assets and liabilities of Washington Mutual which was one of the country’s primary subprime lenders. The bank is considering modification of up to $70 billion of mortgage debt owed by up to 400,000 homeowners. The details reported by the Wall Street Journal suggest that J.P. Morgan’s new program addresses a limited group of borrowers. The bank apparently is targeting primarily homeowners with so-called option adjustable rate mortgages which loans permit borrowers to make minimal payments that don’t even cover the interest. If only minimal payments are made the mortgage principal balance can increase each month by the amount of accrued interest. In the case of the increasing principal balance and a decreasing property value the mortgage lender’s loss exposure may increase month to month; this is not good for either the borrower or lender. The Journal said that J.P. Morgan will try to switch these homeowners to fixed rate loans with payments the families can afford. The other mortgage modification plan reported in the Wall Street Journal is the government’s FDIC program directed to borrowers from the defunct lender IndyMac which the government had taken over. The FDIC now administers these mortgages through a new entity called IndyMac Federal Bank. After examining its borrowers’ tax returns the new program would modify the terms and balance of the mortgage so that the homeowner pays no more than 38% of his current income toward the mortgage, real estate taxes and insurance. The program has limits. The FDIC is considering modification of IndyMac mortgages only when the borrower occupies the property; investors and speculators are not eligible. It is likely that no private bank or federal mortgage relief program will help investors. The government’s stated policy is to keep people in their homes and not bail out private real estate investors. Another limitation applicable to the FDIC program, the Journal reports, is that the FDIC will not rework a loan if it thinks it can make more money by foreclosing and selling the property. posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida