Wildcard in Florida Chapter 13: Beware

Bankruptcy in Florida applies the exemptions permitted under state law.  Traditionally, a debtor can only exempt $1,000.00 in personal property.  Florida expanded this amount to $4,000 ($8,000.00 for husband and wife)  if the debtor does not retain the benefit of a homestead.  There has been much litigation on this issue in chapter 7 when a debtor attempts to use the additional exemption, called a wildcard, and yet retain an underwater home on the theory that the trustee could not do anything with the property.   I have discussed this issue in the past as to chapter 7 cases.

The point of this post has to do with chapter 13 bankruptcies.  The chapter 13 bankruptcy trustee for Broward and Palm Beach, Robin Weiner, has not objected to the debtor claiming the extra exemption though retaining the home.   The chapter 13 trustee does not liquidate or sell off the assets of the debtor.

I was in court last week and heard a debtor’s attorney bring to the court a motion to permit the sale of the homestead property.  Normally, this is not a problem in a chapter 13.  The debtor can even retain the proceeds.  But real estate values have increased.  In this case, the debtor was getting cash out.  Judge Olson confirmed that these funds from sale of the home would not be exempt because the debtor did not claim the home exempt.   The debtor had claimed the Florida wildcard exemption.   The debtor promptly announced he would withdraw the motion to approve sale.  (The judge’s comments, as I interpret them,  meant that the trustee might be obligated to pursue the matter to obtain the proceeds for the bankruptcy even if the debtor did not want to proceed with the sale, or at least perhaps change the amount that the debtor must pay during the chapter 13)

Bottom line, this is just another example where claiming the wildcard with the hope of retaining the homestead without a claim of exemption can be quite risky.



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