Florida Statutes sec. 222.25(4) allows an additional $4,000.00 personal property exemption for debtors who do not “claim or receive the benefits of a homestead exemption under s. 4, Art X of the State Constitution.” If a debtor still lives in his homestead, but does not claim it exempt, is he still entitled to the “wildcard” $4,000.00 exemption? Bankruptcy courts had considered this question under various circumstances and had not agreed on the answer. The matter has now been resolved by the Florida Supreme Court, at the request of the United States 11th Circuit Court of appeals. The Florida Supreme Court, in Osborne v. Dumoulin, 55 So. 3d 577 (Fla. 2011) provided a liberal interpretation of this statute.
The rule set forth in Osborne is more debtor friendly than the previous interpretations of the statute by most bankruptcy courts. If a debtor does not claim his residence exempt and does nothing to prevent a bankruptcy trustee from selling it, the debtor can claim the additional $4,000.00 personal property exemption, which, when added to the $1,000.00 constitutional personal property exemption, allows for a total $5,000.00 personal property exemption. This type of exemption is commonly referred to as a “wildcard” exemption since it can be used to protect any type of personal property. Many exemption statutes allow the exemption of only a specific type of property, such as sec. 222.25(1), which allows a debtor to exempt $1,000.00 of motor vehicle. For a complete list of Florida exemptions, please see the summary located at https://edwardpjackson.com/Bankruptcy/Florida Exemptions.htm.
The practical effect of this ruling is to allow a debtor whose home has no equity to keep his home and still claim the additional $4,000.00 personal property exemption. If the debtor owes more on the home than it is worth, he does not need to claim the home exempt to protect it from the trustee. A bankruptcy trustee could not sell the home for any net proceeds to distribute to unsecured creditors if more is owed on it than it is worth.
A few bankruptcy trustees, in an attempt to force debtors to waive their $4,000.00 homestead exemption, tried ordering debtors to vacate homes they had not claimed exempt. The theory was that the home, not being claimed exempt, was under the control of the trustee pursuant to 11 U.S.C. sec. 542. Fortunately, the courts put a stop to this.
When Trustee Brook tried this in Tampa, Bankruptcy Judge Delano gave him 60 days to find a buyer, and allowed the debtors to remain in the property during the process. This “fish or cut bait” order was affirmed on appeal, since 11 U.S.C. sec. 542(a) does not require a debtor to turn over property that has inconsequential value to the estate. Iuliano v. Brook, 2011 U.S. Dist. LEXIS 47156 (M.D. Fla. Apr. 29, 2011). A similar decision was entered by Bankruptcy Judge Glenn in Jacksonville. In re Rodale, 452 B.R. 290, (Bankr. M.D. Fla. 2011). Based on the recent Dumoulin decision, Judge Glenn decided that a debtor with no equity in his home could still claim the $4,000.00 “wildcard” exemption even though he intended to remain in the home he did not claim as exempt.