But efforts to amend homestead exemptions draw fire from bankruptcy experts and states' rights advocates.
When Burt Reynolds declared bankruptcy in 1996, there was one thing his creditors couldn't touch: Valhalla, his $2.5-million estate in Hobe Sound.
Despite debts of about $10-million, the actor was able to take advantage of Florida's liberal bankruptcy laws allowing him to keep his luxury home while paying his creditors a fraction of what they were owed.
That did not sit too well with some members of the U.S. Senate.
"We are fans of his movies . . . but we have to say that in this case he is making out much like his title role in Smokey and the Bandit," read a 1998 conference report accompanying a failed attempt at a bankruptcy law overhaul.
Now a new bankruptcy bill in Congress may change Florida's reputation as a debtor's haven by making some filers give up their homes.
Last year, there were 71,284 personal bankruptcy filings in Florida, second in the nation only to California. Florida's total represented almost 6 percent of the 1.2-million personal bankruptcy filings nationwide in 2000, according to the American Bankruptcy Institute.
Currently, Florida and four other states _ Iowa, Kansas, South Dakota and Texas _ allow an unlimited homestead exemption, which debtors can use to keep their homes' value out of the reach of creditors in bankruptcy court.
In Florida, the amount of property is limited to a half-acre within a city's limits, or as much as 160 acres in the country.
That has resulted in what some regard as high-profile abuses of the system in Florida. Among them: Former corporate raider Paul Bilzerian, convicted of securities fraud, has kept his 10-bedroom mansion despite filing twice for bankruptcy protection.
Other examples include former baseball commissioner Bowie Kuhn, who moved into and kept a $1-million home in Ponte Vedra Beach after his New Jersey law firm went under in 1990, and Marvin Warner, a one-time ambassador to Switzerland who bought a horse farm near Ocala while seeking protection from creditors after his Ohio bank failed.
"The average citizen's sense of fair play is probably insulted when someone who has a million dollar home declares bankruptcy and that's one of the assets that they're able to keep," said Kathy Bartlett, a spokeswoman with the Florida Bankers Association, which supports the federal bankruptcy legislation.
The Senate passed a bill Thursday that would overhaul bankruptcy laws two weeks after the House passed its own version.
Before the bill's Senate passage, Sen. Herb Kohl, D-Wis., introduced an amendment allowing debtors to keep no more than $125,000 of the equity in their homes. According to Kohl, congressional investigators have found that about 400 homeowners in Florida and Texas, all with more than $100,000 in home equity, profit from the exemption each year.
"And while they continue to live in luxury, they write off an estimated $120-million owed to honest creditors," Kohl said.
The House version also would amend homestead exemptions such as Florida's, but in a different way. Instead of capping home equity, it would require debtors to live in their home for at least two years before filing or else lose their exemption. Such a provision might discourage a debtor from making a last-minute home purchase to shield his assets.
President Bush opposes national caps on homestead exemptions but has signaled he would sign bankruptcy legislation.
Lawmakers in states that have the homestead exemption also oppose efforts to limit it. Sen. Bob Graham, D-Fla., said Kohl's provision "would threaten homeownership for millions of American families." And Sen. Kay Bailey Hutchison, R-Texas, contends it would threaten a 130-year-old right of the states.
Neither Reynolds' attorney, publicist nor manager would comment Monday.
Some bankruptcy experts say the crackdown on homestead exemptions will not accomplish much.
"There's something that runs very contrary to a sense of fairness for someone to go through bankruptcy and retain a multimillion dollar house, but it happens very, very rarely," said Tampa bankruptcy lawyer William Zewadski. He estimated the exemption is an issue in less than 1 percent of the cases he has handled.
"But when it happens, it often results in color pictures on the front page of the paper," Zewadski said.
Retired federal Bankruptcy Judge Alexander Paskay in Tampa decried Kohl's use of "anecdotal horror stories" such as that of Reynolds.
"This is a gross overreaction," said Paskay, a 38-year veteran of the bankruptcy court who still hears cases as needed. "There's no practical reality to this thing."
Sam Gerdano, executive director of the American Bankruptcy Institute, a non-profit research group, said there is some doubt a federal law can trump what is written into a state's constitution, as Florida's homestead exemption is.
_ Times staff writer Scott Barancik contributed to this report.