Osborne v. Dumoulin: Florida Supreme Court Decision Clarifies Use Of The $4000

On behalf of Bankruptcy Law Firm of Clare Casas on Friday, February 4, 2011.

Under Florida law, a bankruptcy filer gets $1,000 to protect personal property. Florida law also allows a debtor to claim a personal property exemption up to $4,000 if they do not claim or receive the benefits of a homestead exemption (unlimited protectic on equity in your homestead residence) under the state constitution.

In the case of Osborne v. Dumoulin, the debtor filed a Chapter 7 bankruptcy in Fort Lauderdale. She originally claimed a homestead exemption and among her other personal property, she listed a car worth $5,925 that was paid off. Overall, she had about $4,000 in assets that exceeded the amount she had available to protect property. The trustee demanded that she pay him the $4,000 in order to keep the property.

Instead, Ms. Dumoulin amended her bankruptcy schedules and did not claim her home as exempt anymore. Instead, she claimed the additional $4,000 available under F.S. 222.25(4) for those who do not claim or receive the benefit of a homestead exemption. Under the amended schedules, she had an additional $4,000 to protect her assets and would not have to pay the trustee anything to keep her property.

The bankruptcy trustee objected to the personal property exemption, arguing that it was unavailable to the debtor because she had a homestead.

The Florida Supreme Court just released their decision in this case and held that where a debtor in bankruptcy elects not to claim the article X, section 4, homestead exemption and the trustee's administration of the bankruptcy estate is not otherwise obstructed by the existence of the homestead exemption, the debtor does not receive the benefits of the homestead exemption and may claim the section 222.25(4) personal property exemption of $4000.

This decision helps many homeowners who are filing bankruptcy but do not intend to keep their home and need the additional $4,000 to protect cars or other assets.

But the Florida Supreme Court also stated that it depends on the facts in a given case as to whether the existence of a homestead precludes a debtor from claiming the state's personal property exemption. An example of that would be a scenario where there is a married couple that jointly own a home but only one of the them file bankruptcy. In that scenario, the wildcard exemption of $4,000 may not be available because the debtor is still receiving the benefit of the homestead exemption through their spouse that did not file.

Although this decision provides great clarity on an issue that has been debated in the bankruptcy courts, the Court did state that it's availability would be specific to the facts in each case.