ARRANGE AN APPOINTMENT
In the September 2007 edition of the Palm Beach County Bar Association Bulletin, I wrote about the July 1, 2007, amendment to Florida Statute § 222.25 which increased a debtor’s personal property exemption from $1,000 to $4,000 under certain circumstances. Specifically, Florida Statute §222.25(4) now states the following property is exempt:
A debtor’s interest in personal property, not to exceed $4,000.00, if the Debtor does not claim or receive the benefits of a homestead exemption under s. 4, Art. X of the State Constitution. This exemption does not apply to a debt owed for child support or spousal support.
Since the amendment to Florida Statute § 222.25(4), three opinions have been issued interpreting various aspects of the personal property exemption.
The first opinion, issued by Judge Paskay in the Middle District of Florida, addressed the issue of whether the new $4,000.00 personal property exemption was in lieu of or in addition to the $1,000.00 personal property exemption allowed under the Florida Constitution. In In re Bezares, 377 B.R. 413 (Bankr. M.D. Fla. 2007), Judge Paskay held that the amendment to Florida Statute §222.25 added $4,000 to the previous $1,000 Constitutional exemption. Accordingly, Judge Paskay held that the statutory amendment increased to $5,000.00 the total allowable personal property exemption available to a person who does not claim or receive the benefits of the homestead exemption.
In December 2007, Judge Willliamson of the Middle District of Florida issued an opinion which addressed multiple issues raised by the amendment to Florida Statute § 222.25. In In re Gatto, 2007 WL 4554217 (Bankr. M.D. Fla.), Judge Williamson agreed with Judge Paskay that debtors could stack Constitutional and statutory exemptions so as to exempt up to $5,000 in personal property and further found that in joint Chapter 7 case, each debtor could exempt up to $5,000 in personal property for a total of $10,000. Additionally, Judge Willliamson addressed the issue of what it means to “receive the benefits of a homestead exemption…” In that regard, Judge Williamson held that incidental benefits of home ownership such as the acquisition of owner's equity, the ability to deduct mortgage interest, and the exemption and cap on real estate taxes are not the benefits which are derived from the homestead exemption under section 4, article X of the Florida Constitution. Judge Willliamson stated that it is only where a debtor does not claim the benefit of shielding the homestead from creditors, as opposed to other non-creditor related homestead benefits, that the debtor may enjoy the statutory personal property exemption.
In In re Morales, Case No. 07-16284-BKC-RBR, Judge Ray from the Southern District of Florida, Fort Lauderdale Division, also addressed the issue of the meaning of the phrase “receive the benefits of a homestead exemption…” Judge Ray found that if a Debtor properly abandons his entire interest in his homestead at the start of a case and does not claim his homestead exemption then he would be entitled to claim the larger personal property exemptions. Judge Ray left open the question of whether a Debtor can amend his schedules and simultaneously increase his personal property exemption and at the same time abandon all interest in his homestead.
The issue remains open as to whether a debtor is “receiving the benefits of a homestead exemption” merely by living in their homestead on the date they file their bankruptcy petition. An argument can be made that regardless of whether the Debtor claims their homestead as exempt or states their intention to surrender their homestead, the debtor still receives the benefit of the homestead exemption as the homestead is still protected from the liens of post discharge judgment creditors. Bankruptcy practitioners should pay close attention to case law updates as there are many pending cases before Florida’s bankruptcy judges which will ultimately interpret what it means to “receive the benefits of a homestead exemption.”
