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Florida Supreme Court Expands Debtor's Eligibility For $4,000 Wildcard Personal Property Exemption

By Jonathan Alper

The Florida Supreme Court has substantially expanded the amount of personal property  Florida bankruptcy debtors can exempt in a Chapter 7 bankruptcy. At issue is the so-called ?wildcard? exemption under Florida Statute 222.25 (4) which permits a $4,000 additional property exemption to debtors who do not receive the benefit of the Constitutional homestead exemption. I have not read the entire opinion (25 pages), but this is an initial summary.

Up to now, bankruptcy courts have narrowly construed this exemption. The courts have held that even debtor who do not claim their homestead as exempt on their bankruptcy schedules are ineligible for the $4,000 wildcard if they receive, or could receive, any legal benefit of a homestead exemption. Thus, for instance, a debtor with an upside down homestead with no equity to exempt still has been ineligible for the $4,000 wildcard exemption if  that debtor had or could have had other legal benefits of homestead ownership. Another example of a narrow interpretation is a case where a man filed bankruptcy individually, and the man and his non-filing wife jointly owned a homestead. The man claimed the house exempt as a tenants by entireties asset but did not assert homestead exemption. A bankruptcy court held that because the debtor?s non-filing wife retained homestead rights the debtor could receive homestead benefits.

The Florida Supreme Court rejected bankruptcy judges strict and narrow reading of the wildcard exemption. The Court held that the wildcard exemption should be interpreted with the broadest possible reasonable application. The Court held,   

    Accordingly, we now answer the rephrased question in the negative and hold that where a debtor in bankruptcy elects not to claim the article X, section 4, homestead exemption and the trustee.s administration of the bankruptcy estate is not otherwise obstructed by the existence of the homestead exemption, the debtor does not receive the benefits of the homestead exemption and may claim the section 222.25(4) personal property exemption of $4000.   

This case is important for bankruptcy debtors because Florida law has otherwise very low dollar exemptions, $1,000, for cars and $1,000 for all other personal property. Many additional debtors now can substantially increase the value of exempt personal property by using the liberalized wildcard exemption under Section 222.25(4).  The case is Osborne, v. Dumoulin No. SC09-751

Full post as published by Florida Bankruptcy Law on February 03, 2011 (boomark / email).