Academic journal article St. Thomas Law Review

The Complications of Fla. Stat. (Section) 222.25(4). Does Florida's Wildcard Exemption Allow Married Debtors to Double Dip?

Academic journal article St. Thomas Law Review

The Complications of Fla. Stat. (Section) 222.25(4). Does Florida's Wildcard Exemption Allow Married Debtors to Double Dip?

Article excerpt

I. INTRODUCTION

When debtors file for bankruptcy, their assets become property of the estate under the Bankruptcy Code. (2) Exemptions provide debtors with the legal fight to shield certain property from creditors. (3) Several policy reasons justify the existence of exemptions. (4) For example, they ensure debtors maintain a minimum standard of living once they emerge from bankruptcy so they do not need to rely on the state. (5) Exemptions also protect the debtor's family, who suffer the consequences of the debtor's misfortune. (6) Likewise, exemptions help preserve the family unit because they reduce economic stress, which is a common cause of separation and divorce. (7) While the Bankruptcy Code contains exemption provisions, it also allows states to create their own. (8)

Florida has "opted out" of the federal scheme and requires that debtors in the state claim the exemptions set out in Chapter 222. (9) The Florida Constitution adds an unlimited homestead exemption. (10) Specifically, it provides that a property owner may exempt from creditors 160 contiguous acres outside a municipality or half an acre of contiguous land within a municipality. (11) Article X, section 4(a)(2) of the Florida Constitution also provides all Floridians with a $1,000 personal property exemption. (12) The Florida legislature recently amended Florida Statutes, section 222.25 to allow natural persons who do not claim homestead or receive its benefits under the Florida Constitution an additional $4,000 personal property exemption. (13) Like other personal property exemptions, this wildcard provision helps ensure "debtors ... have necessary items for living in reasonable comfort and for earning a living." (14)

While many in the Bankruptcy community thought the new section 222.25(4), would easily integrate with Florida's existing bankruptcy exemptions, the wildcard exemption has actually generated confusion and litigation. (15) One such issue concerns a married debtor's ability to exempt his or her real property under tenancy by the entirety law and also claim the additional $4,000 wildcard. (16)

Bankruptcy courts in every Florida district have addressed how the new wildcard exemption fits into the Florida exemption scheme. (17) Part II of this paper outlines the relevant cases and explains the reasoning behind their differences. (18) While not all of the cases directly address whether a married debtor exempting real property under tenancy by the entirety can also claim the additional $4,000 wildcard exemption, the analyses they contain are germane to the issue. (19)

Generally, debtors who do not affirmatively claim the homestead exemption are entitled to the wildcard exemption if they do not receive the benefit of constitutional homestead. (20) Part III considers the threshold issues of how and when a debtor receives the benefit of homestead to decide whether married debtors exempting a residence under the law of tenancy by the entireties may also claim the $4,000 wildcard exemption. (21) Specifically, the determination of whether constitutional homestead is self-executing helps determine what steps debtors must take, if any, in order to receive a benefit without affirmatively claiming it. (22) This section also examines the two opposing arguments regarding the timeframe during which courts assess the debtor's relationship with the property for purposes of the wildcard exemption. (23) It explains that the rigid approach of not allowing debtors to modify their exemptions for section 222.25(4) purposes leads to negative consequences, and is contrary to bankruptcy policy. (24) Finally, Part IV uses the analysis from the previous section to examine the diverging opinions regarding debtors' ability to exempt their homes as tenancy by the entireties and claim the wildcard exemption. (25) This section also explores the history and policy behind tenancy by the entireties law as well as the legislative history behind Florida's wildcard exemption. …

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