On February 3, 2011, the Florida Supreme Court issued its opinion in the Osborne v. Dumoulin case, which decided whether for the purpose of the statutory personal property exemption in section 222.25(4), a debtor in bankruptcy receives the benefits of Florida’s article X, section 4, constitutional homestead exemption where the debtor owns homestead property but does not claim the homestead exemption in bankruptcy and the trustee’s administration of the property is not otherwise impeded by the existence of the homestead exemption.

The Florida Supreme Court held a debtor may claim the statutory personal property exemption (often referred to as the $4000 wildcard exemption) even if the debtor owns a homestead but does not claim the benefit of the constitutional homestead exemption. This decision resolved numerous conflicts between the courts.

While it is good news for debtors facing bankruptcy in Palm Beach who are upside down in their homes, it is important to remember that not claiming the Florida bankruptcy homestead exemption does at least temporarily expose the home to being administered by the West Palm Beach bankruptcy trustee. More than likely the trustee will not administer the home for the benefit of the estate because there is no or very little equity in the home rendering that effort meaningless. However, I have had a couple of colleagues tell me the trustee has told their clients they have 30 days to get out of the home because they did not claim it as exempt, and therefore it is part of the bankruptcy estate. In reality, those clients never did leave the homes and we do not know if or when the issue will ever be litigated. In my opinion, I think there is a strong argument that the bankruptcy trustees should not demand the debtors leave their homes because legal title still remains in their names until the bank forecloses. As a West Palm Beach bankruptcy attorney who also handles Florida home foreclosure defense matters, I know from experience that can take years, which would hamper a debtor’s fresh start if they have to pay for housing at another place and still pay to maintain the home that is legally in their names because the West Palm Beach bankruptcy trustee told them to leave.

If you are facing a home foreclosure or your debts are becoming so high that you can not afford to pay them each month, it is important that you seek the help of an experienced West Palm Beach bankruptcy attorney or a qualified West Palm Beach foreclosure defense attorney. My West Palm Beach bankruptcy and foreclosure defense law firm offers a free initial consultation in order to review your matter and help you determine if the hiring of a bankruptcy lawyer is right for you.