Automatic Stay Is Not Equivalent to Homestead Exemption

Posted by NCBRC - May 22, 2015

Bankruptcy’s automatic stay does not provide the benefits of Florida’s homestead exemption to preclude the debtors’ use of the state wildcard exemption. Valone v. Waage (In re Valone), No. 14-11457 (11th Cir. Apr. 29, 2015).

The Valones, Florida residents, filed for chapter 13 bankruptcy and sought to exempt personal property pursuant to the wildcard exemption found in section 222.25(4) of Florida’s Statutes. That section allows the exemption so long as the debtor does not claim, “or receive the benefits of” the homestead exemption under the Florida Constitution. The Valones did not claim the homestead exemption. The trustee objected to the Valones’ use of the wildcard exemption on the basis that even though they did not claim the homestead exemption, merely filing their chapter 13 petition had the effect of protecting their home against the claims of creditors. Relying on Osborne v. Dumoulin, 55 So. 3d 577 (Fla. 2011), which held that a debtor may receive the benefits of the homestead exemption without claiming it, the bankruptcy court disallowed the wildcard exemption. The district court affirmed.

The Eleventh Circuit reversed and remanded. (The court had jurisdiction over the appeal after the debtor’s plan was confirmed without the wildcard exemption). The court found that, in order to preclude use of the wildcard exemption, the residence must not only be shielded from creditors, but must be shielded by reason of the homestead exemption. Here, it was the operation of bankruptcy’s automatic stay that protected the Valone’s home from the reach of creditors, not the state homestead exemption. The court’s analysis began and ended with the plain language of the statute, finding that “[i]t is exceedingly clear that this phrase [“receive the benefits of”] is triggered only if the homestead exemption—and the homestead exemption alone—protects the debtor’s home from creditors.” An example of a situation in which a debtor could decline to claim his homestead exemption yet still receive its benefits would be when the residence is protected from creditors by assertion of the homestead exemption by a non-debtor spouse.

The court explained that to preclude use of the wildcard exemption, the homestead exemption, or its benefit, must be effective at the time the wildcard exemption is claimed. Therefore, the fact that the debtors may have claimed the homestead exemption before bankruptcy, or may do so at a later date, is not relevant to the inquiry. The court found that the bankruptcy court incorrectly interpreted Osborne to find that “the benefits of” could extend beyond the benefits offered by the homestead exemption itself to anything that impaired the trustee’s ability to administrate the asset.

Valone 11th Cir opinion



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  1. By Bankruptcy News Briefs 5/29 | NACBA Now on May 29, 2015 at 6:07 pm

    […] Automatic Stay Is Not Equivalent to Homestead Exemption […]

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