The Florida Supreme Court liberalized the application of the $4,000 wildcard exemption in February, 2011, applicable to Chapter 7 bankruptcy in Florida. The Supreme Court said that the wildcard exemption can be stacked upon the Constitutional exemptions for personal property and automobiles for any debtor who does not claim the homestead exemption in bankruptcy and where the homestead exemption does not otherwise impede the trustees administration of the bankruptcy estate. Some bankruptcy trustees have suggested that debtors are ineligible for the wildcard exemptions when they indirectly get the benefit of a homestead exemption even though they do not expressly claim the homestead exemption on their bankruptcy schedules. The trustees are trying to chip away pieces of the wildcard exemption in order to increase the value of property subject to the trustee’s administration and trustee commission.
A recent bankruptcy court decision addressed two such trustee arguments seeking to disallow the debtors wildcard exemption. The court first considered the situation when a debtor owned an upside down homestead. The debtor intends to retain the home and reaffirm the mortgage. Because the house has no equity, the debtor did not claim any amount of homestead exemption. The court considered whether a debtor receives the benefits of a homestead exemption, and therefore is ineligible for the wildcard exemption, when the trustee is unlikely to administer the upside down house and the debtor intends to retain the house.
The court held that a debtor does not receive the benefit of a constitutional homestead exemption that he does not claim as exempt in bankruptcy even if the trustee is likely to abandon the property because it has no value. The court also held that a debtor does not receive the benefit of a homestead exemption if he declares his intent to retain the upside down homestead. Actual surrender of the homestead to a mortgage lender is not required to claim the wildcard exemption. The case is: 3:10-6845