Underwater Florida Homeowners Using State 'Wildcard' Exemption In Bankruptcy Urged To Resist Being Squeezed By Rogue Trustees Using Unsavory Ch. 7 Shakedowns

Jacksonville, Florida bankruptcy attorney Chip Parker writes in the Bankruptcy Law Network:

• As I previously reported, we have a problem in the state of Florida with a few rogue bankruptcy trustees using unsavory tactics to shakedown Chapter 7 debtors.



• Specifically, in the State of Florida, a debtor can choose between his homestead exemption and his wildcard exemption. The homestead exemption grants the debtor protection of all his home equity while the wildcard exemption grants $4,000 per debtor that can be applied to any property.



• Since, according to CoreLogic, half of all Florida homes have zero or negative equity, the home equity exemption is worthless. Therefore, debtors are opting to select the wildcard exemption to protect more of their personal property from the bankruptcy estate.



• The trustee’s job is to maximize the bankruptcy estate for the benefit of creditors, and he’s none too happy about the size of the estate being shrunk by up to $8,000 in a joint case where debtors elect the wildcard exemption. While the mainstream trustees have accepted this new reality, the rogue trustees have deployed guerrilla-like tactics against Florida debtors.



• Specifically, the rogue bankruptcy trustee demands that the debtor “turn over the keys” to their home if they fail to claim the homestead exemption. Now, we all know the trustee doesn’t want the house or the keys. He is merely attempting to extort money from a frightened debtor with visions of being booted to the curb.



• In a recent Jacksonville case, Jacksonville bankruptcy lawyer Ed Jackson demanded (in a motion) that the trustee “administer or abandon” the house, and Judge Paul Glenn agreed. He ordered the trustee to present a “bona fide contract to sell or otherwise administer” the debtor’s house within 60 days.



• So, can the trustee get a real estate agent to agree to short sell an underwater house? Sure, but no credible realtor would ever testify that the bankruptcy estate would get any money from the short sale. Therefore, the house would be “inconsequential” to the estate and therefore NOT subject to administration. Checkmate! Debtor wins.



• If a bankruptcy trustee demands that you turn over the keys to your home because the house isn’t claimed as exempt, what should you do?



• The issue is whether the house will generate money for the estate. A house will only generate money if it can be sold at a net profit for the estate or if it is rented for an amount greater than the mortgage payment and maintenance costs (that means homeowners association dues, taxes, insurance, etc.).



• Therefore, the first thing you do is file a Motion to Compel Trustee to Abandon or Administer Property. Second, set the trustee’s deposition, and ask him to explain his plan for generating money for the bankruptcy estate.



• Some trustees are ruthless, but they are all smart. None of them want to look stupid at a deposition, and the rogue trustee knows a decent lawyer will box him in a corner. Rather than lose some teeth in a street fight, the trustee will back down.



• If your bankruptcy lawyer won’t go to bat for you, it’s time to start looking for new representation.

Source: Can my Chapter 7 trustee kick me out of my Florida home? (Not if you hire an experienced bankruptcy lawyer).

See Osborne v. Dumoulin, 55 So. 3d 577 (2011), in which the Florida Supreme Court addressed the the circumstances under which a debtor is entitled to the statutory $4000 personal property 'wildcard' exemption from legal process for debtors who do not claim or receive the benefit of a homestead exemption.

In a related post, see Bankruptcy Trustee's Attempt To Boot Homeowner In Underwater Home Fails; State 'Wildcard' Exemption Allows Debtor To Stay Put.