You may know that most states provide debtors with exemptions which protect them from their creditors to one degree or another. The overall subject of exemptions is broad and will be covered in separate blogs, white papers, and webinars. For this discussion, we are only dealing with one type of exemption, commonly referred to as the “wildcard” because generally the debtor is allowed to choose how to employ it under certain circumstances. This discussion is primarily limited to how the wildcard exemptions are applied in the context of bankruptcy.
What is the Wildcard Exemption?
The wildcard exemption permits a debtor to exempt from legal process a debtor’s interest in personal property, not to exceed $4,000, if the debtor does not claim or receive the benefits of a homestead exemption. That means a creditor cannot garnish or execute upon personal property up to that amount, if the debtor asked to exempt it. This rule also applies in bankruptcy.
Parameters & Exceptions
Normally, if a Florida debtor owns a homestead as a principal place of residence, they do not get the benefit of the $4,000 wildcard exemption. However, a debtor owning a homestead may still receive the benefits of both the wildcard exemption and the homestead exemption without claiming the homestead exemption in the bankruptcy if the homestead has no equity or if the bankruptcy court is not prevented from administering the residence as an asset of the estate.
Courts must determine, based on the facts of each case, whether a debtor, who does not claim the homestead exemption on their bankruptcy petition, still receives the homestead exemption benefits.
Protection Under Wildcard Exemptions
Such a situation may arise, for example, where a married debtor does not claim the homestead exemption in the petition but their non-debtor spouse retains the right to the homestead exemption. Thus, the debtor must receive protection against creditors from the homestead exemption, even if that protection is indirect, to be ineligible for the wildcard exemption; similar protection from any other source is insufficient.
In this situation, the debtor now gets the benefit of the homestead exemption and can exempt $4,000 of personal property from the bankruptcy, in addition to the Constitutional and statutory respective $1,000 personal property exemptions. Thus, married bankrupt debtors owning a homestead, but not claiming the homestead exemption, are each entitled to these personal property exemptions and can “stack” them to effectively exempt up to $10,000 in personal property from their bankruptcy.
Hiday & Ricke has been providing legal services for creditors throughout Florida for many years. We encourage you to call us at (904) 363-2769 today to see how we can improve your bottom line and help with any bankruptcy questions.