Miami ? Elona Kaplan moved to Florida 2 1/2 years ago after going through a divorce. She bought a $178,000 bayfront condo in Sunny Isles Beach, just north of Miami, where she hoped to start a new life.

But Kaplan couldn’t find a job, burned through her savings and started living off credit cards. Charges for food, clothing and the mortgage and other costs for the condo pushed her card balances above $27,000, which led the 43-year-old to file for Chapter 7 bankruptcy in May.

Kaplan hopes to keep her condo under Florida’s generous homestead law, which bars creditors from seizing someone’s primary residence if the homeowner goes bankrupt. But changes in federal bankruptcy law may make that harder not only for her, but also for others in Florida and four other debtor-friendly states.

Most of the big changes in bankruptcy rules, which backers say are designed to prevent abuse of the financial system and ensure affordable credit is available for all, take effect Monday. People with above-average income, as determined by a standard “means test,” will be barred from filing for Chapter 7 protection, where debts may be wiped out entirely. Instead, they will have to file under Chapter 13, which require a five-year repayment plan. Filers also will be required to get professional credit counseling with 180 days of filing.

Filings soar

That’s led to a surge in filings in recent weeks. They averaged more than 20,000 per day nationwide last week and are up almost 20 percent year to date, according to Lundquist Consulting, which tracks bankruptcy filings.

But the provisions affecting home ownership, which override state laws, went into effect in April when President Bush signed into law the federal Bankruptcy Abuse Prevention and Consumer Protection Act.

Kaplan’s financial problems were detailed in her bankruptcy filing. She did not return repeated phone messages.

Florida's generous homestead law bars creditors from seizing someone's primary residence - such as O.J. Simpson's South Miami home in this 2000 file photo - if the homeowner goes bankrupt. Many wealthy people with financial or legal trouble have used the favorable laws to sell all their assets to buy multimillion dollar homes in states such as Florida and Kansas and then file for bankruptcy protection.

Her bankruptcy lawyer, Richard Birkenwald, said the law is unfair to people who find themselves in financial difficulty through no fault of their own. He said most of his clients file because of illness, medical bills, divorce and losing their jobs.

“They have no choice,” he said.

Some of the law’s supporters said they were trying to force changes in Florida and Texas, which have been called debtor’s paradises and deadbeat havens because of their liberal allowances for homestead exemptions, the amount of a home’s value that is protected from creditors. Those states, along with Iowa, Kansas and South Dakota, allow people in bankruptcy to protect their primary residences from creditors no matter how much the property is worth.

Many wealthy people with financial or legal trouble used the favorable laws. They sold all their assets to buy multimillion dollar homes in one of those states and then filed for bankruptcy, never having to worry that they would lose their mansions. Famous examples include O.J. Simpson and Burt Reynolds.

New restrictions

The revised bankruptcy law now restricts unlimited homestead exemptions to people who have lived in their primary residence for at least three years and four months. For people in their homes for less time than that, the law allows them to keep up to $125,000 of their home’s value.

With house prices skyrocketing in many areas, the changes aren’t just affecting the rich. Middle class homeowners also could lose their residences to creditors if they declare bankruptcy. Median home prices in August were $246,500 in Florida and $139,700 in Texas, well past the exemption limit.

Chart shows daily average number of bankruptcy filings per week; 1c x 3 3/4 inches; 47 mm x 95 mm

The booming real estate market is what hurt Kaplan, now a case manager for a home care agency. Her condo quickly appreciated well past the purchase price – it has been appraised at up to $335,000 now. She has about $150,000 in equity after subtracting the balance on her mortgage, according to the bankruptcy trustee in her case. A trustee, appointed by the court, supervises a bankruptcy case.

After applying the new exemption limit, Kaplan has about $25,000 in equity that could be used to pay off her debts. So the trustee could order the condo sold. But Kaplan is challenging the federal law in court based on an Arizona bankruptcy judge’s ruling that said the limit doesn’t apply in states that allow greater exemptions. However, the judge in Kaplan’s case has made a preliminary ruling that it does; her lawyer has not decided whether to appeal the ruling.

Kaplan and the trustee also could try to reach a settlement.

“I think this law basically went overboard trying to curb perceived abuse of the bankruptcy laws,” Birkenwald said.

But Bush and the law’s bipartisan backers argue it is necessary because the rest of society has to foot the bill for those who go bankrupt.

“In recent years, too many people have abused the bankruptcy laws,” Bush said when signing the bill. “They’ve walked away from debts even when they had the ability to repay them. This has made credit less affordable and less accessible, especially for low-income workers who already face financial obstacles.”