Exemptions In Bankruptcy

15 Mar Supreme Court says Florida Homeowners Can Claim Wildcard Exemption

In July, 2007, Florida’s legislature created a $4,000 wildcard personal property exemption for people who do not receive benefits of a homestead exemption that has become a prime example of the Law of Unintended Consequences.

During the real estate heyday on Florida (Circa 2005), there was a great disparity between homeowners and home renters when it came to protecting assets. Florida’s homestead exemption is unlimited, and homeowners were protecting hundreds of thousands of equity from bankruptcy creditors while renters got only a $1,000 personal property exemption.

The $1,000 personal property exemption has been in place since the late 1800s, and given the time value of money, it is only worth about $70 today. Another way to look at it is that, in today’s economy, a Floridian would need $20,000 to buy the assets that could be purchased for $1,000 back when the original exemption was written into law.

Therefore, it was high time to update Florida exemptions, especially for non-homeowners. The wildcard exemption states that, if a person does not “claim or receive the benefit of” Florida’s homestead exemption, that individual can claim an additional $4000 personal property exemption, meaning married couples can claim a total of $8,000 of asset protection.

As we all know, in the summer of 2008, the stock market crashed, largely due to the housing bubble, and Florida’s real estate market has been in free fall ever since. All those equity-rich Florida homeowners disappeared overnight, making the homestead exemption about as worthless as a parenting book penned by Charlie Sheen.

So, much to the dismay of bankruptcy trustees, debtors filing bankruptcy stopped “claiming the benefit of” the homestead exemption, even though they still lived in their home. Well, this has really upset those Chapter 7 trustees who make money as glorified debt collectors. More specifically, a Chapter 7 trustee keeps 25% of whatever he or she collects from the debtor in “non-exempt assets.” The remaining 75% is paid out to creditors in the bankruptcy case.

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22 Feb Uniform Bankruptcy Law? Your State Does Matter!

As explained by Professor Daniel Austin of the Northeastern University School of Law in Boston, Mass. in the December/January 2011American Bankruptcy Institute Journal,the U. S. Constitution in Article 1, the Bankruptcy Clause, authorized Congress to establish uniform laws regarding bankruptcy throughout the United States. However, as Prof. Austin acknowledges, the reality is far from uniform. Each state has their own state laws which impact bankruptcy as well as variations on how the particular state's bankruptcy courts or appellate courts interpret bankruptcy law. Also, each federal district court has the ability to implement local rules which also affect how bankruptcies are administered. And as each state has attempted to "interpret" the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 over the past five years, the states are even more divided on how bankruptcies are administered as explained by my colleague, Susanne Robicsek from North Carolina.
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06 Feb Sausage, Guns and Cars: Bankruptcy Exemptions and Thoughts on the Legislative Process

Laws, like sausages, cease to inspire respect in proportion as we know how they are made. John Godfrey Saxe, Daily Cleveland Herald (29 March 1869).[1] Previously, I have outlined the exemptions available to Virginia debtors in bankruptcy - property that a debtor gets to keep from...

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26 Dec Outgoing Governor Paterson Gives New York Debtors Something to Cheer About!

Gov. David Paterson has signed a bill that gives more protection to New Yorkers who file bankruptcy or who have been sued by bill collectors. The new law increases the exemptions that people can use to protect their property from forced sales by bankruptcy trustees and debt collectors. It also allows a choice between State and Federal exemptions in bankruptcy cases filed in New York State. Consumer lawyers don't get much to cheer about, but this new law will allow many more financially strapped New Yorkers to get the debt relief they need. 2011 will likely see a large increase in the number of New Yorkers who are forced to file for bankruptcy. This is because of the slowness of the “economic recovery” and now because they will be able to protect more assets while they are eliminating their debts. Debtors can now protect up to $4,000 in their vehicle (up from $2400), $10,000 if the vehicle is equipped for people with disabilities. New York homeowners can now exempt $75,000 each of equity in their home (up from $50,000) in upstate areas like Binghamton, Syracuse, Rochester, and Buffalo. The homestead exemption goes up to $100,000 in the Hudson Valley, and as much as $150,000 in the New York City area and Long Island.
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