Will The Court Uphold Your Homestead Exemption?

Florida’s constitutionally mandated homestead exemption is the holy grail of exemption planning.  Its purpose is to protect the sanctity of the home by providing a shelter for the owner and his family immune from the money judgments of creditors.  In other words, the homestead is exempt from forced sale in all but three limited exceptions: (1) taxes; (2) contracts to repair, improve or purchase the property; and (3) obligations owed to those who perform labor on the realty.

Naturally, then, the homestead has been the bane of creditors and a source of frustration for the judicial system.  Cunning debtors, in an attempt to circumvent a forthcoming or current court ordered obligation to pay, are quick to convert any nonexempt assets available for satisfaction of the judgment into exempt assets unavailable for execution; the homestead is the asset of choice.

Thus, unless you’re a creditor that falls into one of the exceptions listed above, or the legislature decides to amend the constitution (they didn’t when the issue came up), defeating the claims of your creditors vis-à-vis the homestead is constitutionally permissible, however loathe that may seem.  It’s not as simple as it sounds, though, and while anyone in theory can claim homestead, the minutia involved in whether or not your claim will hold up in court on a creditor’s objection is worthy of analysis.

Intent to Hinder, Delay or Defraud the Creditor

It’s natural to panic when you get sued or at the least start to worry when a potential creditor appears on the horizon.  When such a situation arises, many people foolishly believe they can outsmart the creditor by transferring their assets outside of the creditor’s reach, e.g to a spouse or trust in the United States, and effectively prevent the creditor from collecting; this is a fraudulent transfer.  See Fla. Stat. §726.105.  Another situation involves the same person converting a nonexempt asset into an exempt asset, e.g. cash to an annuity, again thinking it will work in their favor; this is a fraudulent asset conversion.  See Fla. Stat. §222.30. 

These types of transfers do not work as the statutes allow the creditor to both sue the debtor who transferred or converted an otherwise attachable asset and to recover it as well.  The strength of the creditor’s claim, of course, depends on timing: Did you make the transfer during the pendency of litigation?  After the judgment?  Or many, many years before any present or future creditor appeared?  Thus, if sued under a fraudulent transfer or fraudulent conversion theory, coupled with the timing of your transfer (which goes to intent), the creditor may have available a plethora of remedies that they could use to unwind or dismantle the transfer, even up to suing the recipient itself, all under the guise that the debtor engaged in fraudulent conveyance with the intent to hinder, delay or defraud the creditor.

But the focus of this article is homestead.  Query: Where the debtor acquires the homestead using nonexempt assets with the specific intent to hinder, delay or defraud a creditor, in direct violation of Florida’s fraudulent transfer and fraudulent conversion laws, will the homestead protection still apply and thus be exempt from forced sale by the creditor?  Absolutely, per the Supreme Court of Florida.

The Power Of The Homestead Exemption: Intent Does Not Matter

The seminal case on the topic decided by the Supreme Court of Florida is Havoco of America, Ltd., v. Hill.  There, the creditor obtained a $15,000,000 judgment against the debtor on December 19, 1990, and the judgment became enforceable shortly thereafter.  On December 30, 1990, a mere eleven days after the judgment was entered, the debtor, from Tennessee, purchased a homestead in Florida intending to make the property his retirement home.  The creditor objected, on grounds that the debtor purchased the Florida home with the sole intention to defraud the creditor, and as such the debtor should not receive the benefit of the constitutionally mandated homestead exemption.

The Supreme Court, faced with the question of whether or not the debtor should enjoy Florida’s homestead exemption, held quite concisely as follows:  “The transfer of nonexempt assets into an exempt homestead with the intent to hinder, delay, or defraud creditors is not one of the three exceptions to the homestead exemption provided in article X, section 4.”  The Court reasoned that despite the debtor’s egregious conduct and clear attempt to skirt the judgment, the Court is powerless to depart from the plain language of the Florida constitution:

There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by a natural person. (emphasis supplied.)

Art. X. Section 4.

In other words, because the creditor in Havoco was not the type envisioned by the constitution to be excepted from the homestead exemption, the creditor could not force the sale of his homestead property, despite the debtor’s obvious and successful attempt to hinder, delay or defraud the creditor.

The Court also noted that legislative enactments, such as Florida’s fraudulent transfer and fraudulent conversion statutes, cannot alter the express or implied provisions of the constitution.  Consequently, Florida’s statutory fraudulent transfer and fraudulent conversion laws do not apply because “homestead arises solely under the Florida Constitution and, therefore, supersedes any attempt by the legislature to deprive the debtor of the ability to exempt his or her homestead through general legislation.”

So, if you get sued just move to Florida, right?  Not exactly.  While Florida’s homestead exemption is generous to debtors and hostile to creditors, a body of case law has developed in equity, or fairness, that speaks to the injustice of allowing the homestead exemption in certain cases.  As a result, it can be said that the Florida Supreme Court actually engrafted a fourth exception to the exemption on forced sale.

Funds Used To Purchase Homestead Traced To Fraud

That’s right.  Florida’s homestead exemption is not absolute — although it is near-absolute — and the particular facts surrounding the issue presented may lead a court to deny the homestead exemption outright or allow for the imposition of an equitable lien.  Florida case law is sparse on the subject of equitable liens and homestead, although as stated in Havoco, “the imposition of an equitable lien in circumstances suggesting the use of fraud in the acquisition of the homestead [is] not a remedy of recent vintage.”

In 1925, a debtor employee embezzled funds from his company and used those funds to make improvements to his homestead.  The Supreme Court of Florida rejected the debtor’s argument against the imposition of an equitable lien, noting that the debtor was a fiduciary who used his position of trust in the company to steal the funds.  As such, “the debtor cannot enjoy tortiously acquired property by claiming it as a part of his homestead exemptions.”  The Court allowed the equitable lien.  Jones v. Carpenter, 90 Fla. 407, 106 So. 127 (1925).

In another case, the debtor forged a mortgage instrument and used the proceeds to pay down another mortgage on his homestead.  The Florida Supreme Court, correctly recognizing that the funds invested in the homestead were sourced to the fraudulent mortgage, allowed the creditor to obtain a lien on the property.  The Court reasoned that when equity, or fairness in the law, is in issue, the courts have “not hesitated to permit equitable liens to be imposed on homestead beyond the literal language” contained in the Florida Constitution.”  Palm Beach Savings & Loan Ass’n v. Fishbein, 619 So.2d 267,270 (Fla.1993).

These cases laid the foundation for the following rule, dubbed the “equitable lien” test: an equitable lien may be imposed on the homestead if (1) the funds used to purchase, repair or improve the property are (2) derived from fraudulent activity or egregious conduct. In re Gosman, 362 BR 549, 553-554 (Bkrtcy. S.D.Fla. 2007).  Thus, when the funds used to purchase the homestead really belong to someone else, or were illicit from the beginning, equity becomes an issue and the person objecting to the exemption may have a right to an interest in the property.  Failing that, though, the Florida Supreme Court is clear: specific intent to hinder, delay, or defraud your creditor by purchasing a homestead is not sufficient in itself to force its sale.

Judgment Recorded Before Claim Homestead

Recording a certified copy of the judgment in the official records of the county where the property is located establishes a judgment lien against real property.  Fla. Stat. §55.10.  Thus, if a judgment lien is recorded before the debtor claims homestead, the creditor may be able to obtain a levy pursuant to Florida Law.  In other words, as stated in Wechsler v. Carrington, “as a result, preexisting liens are excepted from Florida’s homestead exception.”  214 F. Supp.2d 1348, 1352 (S.D. Fla. 2002).

The clever debtor would just move to a different county where the creditor has yet to record their judgment.  However, clever debtors and ambitious creditors are not mutually exclusive.  To that extent, the creditor can also record the judgment anywhere they think you may own property in the future.


Florida’s homestead exemption is hailed as one of the most solid in the country.  Its constitutionally mandated limitless exemption is liberally construed in favor of the debtor, not the creditor.  Without allegations of fraud or egregious conduct, coupled with a questionable source of funds used to acquire the homestead to begin with, not even the debtor’s admitted intent to defraud the creditor is sufficient to subvert the homestead protection.

However, this is assuming that you even have homestead to begin with.  Although self-executing, if the requirements for homestead aren’t met, then quite obviously you can’t claim the exemption.  In addition, the bankruptcy code trumps Florida’s homestead pursuant to the Supremacy Clause of the U.S. Constitution.  If forced into an involuntary bankruptcy proceeding, for example, the homestead exemption (at the time of this writing) is capped at $160,375 if you bought the residence within 1,215 days before filing; there are exceptions to this too, however.

It should also go without saying that successfully exempting your homestead in Florida from forced sale does not make the judgment disappear.  In fact, you’ll still be liable for the full amount owed and if you try and shield otherwise attachable assets by means other than a homestead, you can find yourself sued again under a fraudulent conveyance theory.  Florida’s homestead is a powerful tool, no doubt about it.  If not used correctly, though, don’t expect the courts to have your back.


Ronald C. Iacone Jr., Esq.

Ronald Iacone is the managing and founding partner of Iacone Law. He focuses his practice on asset protection representation, business and international law, and appeals to the interrelatedness of the three to best discuss your issue and solution.


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