In re Magelitz

In In re Magelitz, 386 B.R. 879 (Bankr. N.D. Fla. 2008), the debtor filed a voluntary petition for bankruptcy, and his Florida homestead automatically became property of the bankruptcy estate. 386 B.R. at 883; see 11 U.S.C. 541 (2006). The debtor did not, however, claim the homestead exemption to remove the property from the bankruptcy estate. Instead, he claimed the section 222.25(4) personal property exemption. In re Magelitz, 386 B.R. at 881. When the trustee objected to the debtor's claim of the personal property exemption, the debtor argued that by not claiming his home as exempt, he did not receive the benefits of the article X exemption and was thus eligible for the section 222.25(4) exemption. Id. at 880. After reviewing Florida case law on the article X homestead exemption, the bankruptcy judge concluded that "since the Debtor in this case owns the home, lives in it, and intends to continue to reside there, the property has homestead status under Florida law and therefore receives constitutional protection from creditors regardless of the Debtor's failure to claim the homestead exemption." In re Magelitz, 386 B.R. at 883 . The court discounted the debtor's decision in bankruptcy not to exempt an asset from administration by the trustee, concluding that in cases in which an asset has no equity the trustee typically abandons the property to the debtor. Id. Thus, the court concluded that the debtor's failure to claim the homestead exemption in bankruptcy had no effect on the debtor's receipt of the benefits under the article X exemption. The court reasoned as follows: Before the Debtor filed his bankruptcy petition, creditors were prevented from executing or obtaining judgment liens against his homestead by Art. X, 4, Fla. Const. Now that the petition has been filed, the creditors are stayed from taking such action by 11 U.S.C. 362, and since a debtor's exemptions in bankruptcy are determined as of the date of the filing of the petition, 11 U.S.C. 522(b)(3)(A); In re Peterson, 897 F.2d 935, 937 (8th Cir.1990), a debtor who owns property that has the status of homestead on the petition date is entitled to assert the constitutional homestead exemption in the bankruptcy case. Then, after the debtor is discharged, in spite of the fact that the homestead was not claimed as exempt on Schedule C, post-petition creditors would be not be able to pursue the homestead because of the protection afforded by the self-executing constitutional homestead exemption provision. Thus, by retaining the home, the debtor effectively receives the benefits of the homestead exemption. If the Debtor retains possession of the homestead while also claiming the additional wildcard personal property exemption, he would be able to shield the home from creditors under Art. X, 4, Fla. Const. and protect additional personal property under Fla. Stat. 222.25(4) at the same time. The Florida Legislature did not intend this result--a debtor cannot keep a home and also receive the enhanced personal property exemption under Fla. Stat. 222.25(4). (Id. at 883-84.) The court then ruled that the debtor received the benefit of the homestead exemption by staying in the home and could not claim the statutory exemption. Accordingly, the bankruptcy court held that "in order for a debtor who has an interest in a homestead to claim the $4,000 personal property exemption under Fla. Stat. 222.25(4), the debtor must (1) not claim the property as exempt, and (2) timely and properly show a clear and unambiguous intent to abandon the property." Id. at 884.