Express Declaration of Exemption Not Required for Homestead Protection

Chapter 13 debtors received the benefit of their state’s constitutional homestead protection even though they never claimed the exemption in their bankruptcy schedules. Consequently, the debtors were not permitted to exempt personal property under a statutory wildcard exemption because the wildcard exemption was available only to debtors who did not claim a homestead exemption.

The debtors filed a Chapter 13 bankruptcy case in Florida and successfully stripped a second mortgage from their home. The amount of the first mortgage, however, exceeded the value of the home. Therefore, the debtors did not claim a homestead exemption on Schedule C. Instead, they sought to use the state’s wildcard exemption that is available to debtors who do not claim a homestead exemption. The trustee objected to confirmation of the debtors’ proposed plan, arguing that the wildcard exemption was not available to the debtors. The trustee contended that the debtors received the benefit of the homestead exemption even though they did not claim the exemption in their schedules because the debtors’ home was protected by the automatic stay during the plan duration.

The bankruptcy court upheld the trustee’s objection, and the district court affirmed. The benefit conferred by the state homestead exemption was protection of the homestead from creditors. The debtors received that benefit by filing a Chapter 13 bankruptcy even though they did not claim the homestead exemption on Schedule C because neither the trustee nor any of the debtors’ unsecured creditors could force the sale of the debtors’ home as long as the debtors remained in Chapter 13. Having received the benefit of the state constitutional homestead exemption, the debtors could not claim the statutory wildcard exemption.

Valone v. Waage (In re Valone), 2014 U.S. Dist. LEXIS 31917 (M.D. Fla. Mar. 10, 2014)

About the Author:

George Basharis, JD

George Basharis, J.D. is a practicing bankruptcy attorney in the Northern District of Illinois. He has represented dozens of individuals and small businesses in federal bankruptcy proceedings and related matters. George also advises the CINgroup on a variety of aspects regarding bankruptcy law. He has authored books, white papers, customer newsletters and conducted speaking engagements regarding bankruptcy.