Gov. DeSantis vetoes bill increasing motor vehicle exemption in bankruptcy

Ron DeSantis. Image via AP.

Gov. Ron DeSantis has vetoed legislation that would increases the maximum value of a motor vehicle that may be exempted from bankruptcy cases from $1,000 to $5,000.

The measure (CS/HB 265), sponsored by the House Civil Justice & Property Rights Subcommittee and Democratic Rep. Mike Gottlieb, cleared both the House and Senate chambers in unanimous votes.

The legislation would have raised the exemption value of a debtor’s interest in a motor vehicle from $1,000 to $5,000 in bankruptcy cases. In his transmittal letter announcing his veto of the bill, DeSantis stated that the increased exemption amount should apply to processes outside of bankruptcy, too, in an effort to not incentivize bankruptcy.

“Although it may be time to consider increasing the outdated exemption amount, this increase should apply to all persons who can claim Florida exemptions, whether in or out of bankruptcy, so that people are not incentivized to file for bankruptcy, which has long-lasting, negative consequences for a person’s credit history,” DeSantis wrote in the transmittal letter.

Currently in Florida, a debtor has a constitutional right to exempt his or her homestead from creditors’ claims as long as the property is used as a primary residence, according to the bill analysis. If a debtor does not have a homestead, state law permits the debtor to exempt $4,000 of personal property in a bankruptcy proceeding.

However, additional state exemptions include wages earned as a head of household, the cash surrender value of life insurance policies and annuity contracts, pension funds and exempt retirement accounts, and up to $1,000 of the debtor’s interest in a motor vehicle, which legislators sought to increase to $5,000.

“Historically, exempt assets have remained out of a creditor’s reach unless specifically pledged in a security agreement. During the bankruptcy proceeding, the court determines whether property is exempt from process under non-bankruptcy law,” the bill analysis reads.