What are exemptions?
That’s because the federal government gave the individual states the right to opt out” from the federal exemption scheme to utilize their own exemptions in bankruptcy. Florida is an “opt-out” state. Many states have “opted out” which means that there can be important differences in the property you are permitted to keep, depending on where you live. This is true, even though all bankruptcies are filed in federal court, and you would think you get the same “brand” of treatment in all the courts — not true. Your mileage will vary depending on which state you physically reside in, and for how long you actually resided there. For our discussions, information is focused on bankruptcies filed in Florida only.
FRAUDULENT CONVEYANCES
One explosive caveat you need to be mindful of: if you transfer or convert non-exempt property into exempt property with intent to “hinder, delay or defraud” your creditors (actual civil fraud), or if you receive less than reasonably equivalent value for the transfer at a time when you were insolvent (or the transfer rendered you insolvent) (constructive fraud), you run the risk of your bankruptcy trustee (or creditor) filing a claim against you for a fraudulent conveyance. This kind of claim can be brought under either the Florida state statute, Section 726.105 (known as the “Uniform Fraudulent Transfer Act”) which can “look back” and analyze the transaction for a period of four years from the date you filed for bankruptcy, or under the federal equivalent, 11 U.S.C. Section 548 (which only has a two year “look back period”) – your bankruptcy trustee can use both or either as a tool to claw back the property for the benefit of your bankruptcy estate. In the case of actual civil fraud, the trustee or creditor may object to you receiving your bankruptcy discharge in addition to other remedies afforded by the court. In short, you become “low hanging fruit” for a hungry trustee.
CONVEYANCES THAT ARE NOT FRAUDULENT
Transferring a non-exempt asset into an exempt asset is always risky, especially if it triggers one of the anti-fraud statutes cited above. But this is quite distinguishable from a situation where you transfer or convert an exempt asset into another exempt asset or you sell it outright. The Florida federal bankruptcy courts routinely hold that this kind of transfer does not trigger the fraudulent conveyance statutes because the property was initially exempt, meaning if you would have retained the property into your bankruptcy case, it would have maintained its exempt status and would have been protected from the bankrupty trustee and claims of creditors generally.
Some of the relevant Florida cases (still good as of December 2025) that stand for this proposition are In re Delson, 247 B.R. 873 (Bankr. S.D. Fla. 2000); not (In re Robinett, 47 BR 591 (Bankr. S.D. Fla. 1985), [592]); (In re Fornabaio, 187 BR 780 (Bankr. S.D. Fla. 1995), [782]); (In re Short, 188 BR 857 (Bankr. M.D. Fla. 1995), [859]); (In re Goldberg, 229 BR 877 (Bankr. S.D. Fla. 1998)
