With the sale prices of single-family homes in the South Florida real estate market continuing to climb exponentially, many homeowners are becoming increasingly tempted to ditch the monthly mortgage payments, homeowner’s association dues, and dreaded repair bills as they weigh the pros and cons of selling their homes. There is an admittedly very strong allure and comfort in being able to see and have easily accessible cash in a bank or investment account (especially in the uncertain age of COVID-19). Ultimately, the decision to sell a home is a personal one, however, for homeowners with outstanding final judgments or debts likely to result in a final judgment against them, there is an added valid concern-How safe are the proceeds of the sale of the homestead?
The main thing to know is that Article X, Section 4 of the Florida Constitution protects a Florida resident’s homestead from forced sale by most creditors and that the Florida Courts have ruled that this legal protection should be liberally construed in favor of Florida homeowners. This homestead protection has been extended to the proceeds from the voluntary sale of a Florida homestead provided certain basic steps are taken with those funds. Specifically, the Florida resident must:
- Have a good faith intent, before or at the time of the sale, to reinvest the proceeds into another homestead within a reasonable time;
- Avoid commingling those funds with other monies or proceeds; and,
- Be kept separate and apart and held solely for the purpose of buying another home.
This protection of the funds extends even in the case where the homeowner files bankruptcy. Of course, there are additional steps that we would recommend that the homeowner take prior to filing the bankruptcy preferably at the time of the homestead sale. These little steps may go a long way in ensuring that there are no extended or unnecessary delays in the bankruptcy case. For instance, it is recommended that the funds remain easily traceable. This can be accomplished by having the check from closing deposited directly into a bank account that does not contain any other funds. It is also recommended that you maintain the records from the closing, including but not limited to the final HUD and copy of the check.
If possible, we recommend that the homeowner designate the account as a ‘homestead account’ by including language to that effect in the account creation documents or notes. This account should not be used as a regular checking account. It is best to avoid deposits or withdrawals from this account unless it is for the purchase of a new home.
Loan Lawyers has helped over 7,000 South Florida homeowners and consumers with their debt problems, our Fort Lauderdale foreclosure lawyers saved over 3,000 homes from foreclosure, eliminated $100 million in mortgage principal and consumer debt, and recovered over $25 million dollars on behalf of our clients due to bank, loan servicer, and debt collector violations, negligence, and fraud. Contact our Florida foreclosure defense lawyer for a free consultation to see how we may be able to help you.
