Opinion ID: 2542857
Heading Depth: 3
Heading Rank: 2

Heading: In re Bennett

Text: About six months after Magelitz issued, a different bankruptcy judge also addressed the problem of applying section 222.25(4) in light of Florida's history regarding the article X homestead exemption. In re Bennett, 395 B.R. 781, 784 (Bankr.M.D.Fla.2008). That court held that in federal bankruptcy proceedings a debtor may cease to receive the benefits of the article X homestead exemption without abandoning the real property. In Bennett, a consolidated case, none of the debtors claimed the homestead exemption. 395 B.R. at 784. Further, although several debtors indicated an intent to abandon their homestead, others did not. Id. After reviewing Florida law, the court acknowledgedas had other bankruptcy courtsthat there is little that a homeowner can do under Florida law to lose the protection of homestead [under article X]. Id. at 789 (emphasis added) (citing Magelitz ). The court, however, determined that a debtor in bankruptcy who continues to occupy homestead property may nonetheless cease to receive the benefits of the exemption. As some courts have noted, it is not possible under Florida law to stop receiving the benefits of the Homestead Exemption without abandonment or alienation. If all who could claim the exemption were to automatically receive the benefits of the Homestead Exemption in the context of a bankruptcy, then the decisions in Magelitz, Franzese [383 B.R. 197 (Bankr.M.D.Fla.2008)] and Morales [381 B.R. 917 (Bankr.S.D.Fla. 2008)] would be persuasive in holding that mere eligibility is sufficient and the language of the Statutory Exemption provision would be largely unnecessary. However, it is clear to this Court that a debtor in bankruptcy may cease to receive the benefits of the Homestead Exemption regardless of whether that protection could cease under the operation of Florida law alone. Pursuant to § 522(b)(1) of the Bankruptcy Code, an individual debtor may exempt from property of the estate various items or amounts specified under either the federal or state scheme of exemptions. The term may indicates that the debtor is not required to claim exemptions. If the debtor does not choose to exempt the homestead under the Florida Homestead Exemption, the real property remains property of the estate under § 541 of the Bankruptcy Code and is subject to administration by the trustee. As a non-exempt asset, any equity left in the property after the secured claims have been satisfied could be used to satisfy the claims of unsecured creditors. In that situation, a debtor is not receiving the benefits of the Homestead Exemption's protection of the homestead from forced judicial sale. . . . [I]t is this Court's conclusion that debtors who do not affirmatively exempt their homestead under § 522(b)(1) and the Homestead Exemption, but instead leave it available for administration by the Chapter 7 trustee, neither have claimed nor received the benefits of the Homestead Exemption found in Article X of the Florida Constitution. It is important to note that the Chapter 7 trustee need not actually administer the homestead for it to lose the protection of the Article X Homestead Exemption. That the homestead would not be protected were the trustee to decide to administer it is sufficient, because this means that the protection afforded by the Homestead Exemption has ceased. In re Bennett, 395 B.R. at 789-90 (citations omitted) (emphases added). Both the Magelitz and the Bennett courts agree that under Florida law the article X homestead exemption is effective against creditors in all but the three express instances described in the Florida Constitution and is lost only through abandonment of the homestead. On the basic issue of the effect this has in bankruptcy proceedings, however, the courts have arrived at opposite conclusions. For the court in Magelitz, the homestead debtor in bankruptcy cannot claim the section 222.25(4) exemption absent abandonment of the homestead property. The court in Bennett, however, concluded that bankruptcy is different. Failure to claim a homestead exempt in bankruptcy proceedings necessarily makes the homestead subject to administration for the benefit of creditors. Thus, under Bennett, absent other factors not relevant here, a debtor with a homestead is eligible to claim the section 222.25(4) personal property exemption without abandoning the homestead property.