Federal Court of Appeals Confirms Chapter 13 Debtor’s Right to Claim a Wildcard Exemption Where State Law Allows

The 11th Circuit Court of Appeals released a ruling last month in the case of Valone v. Waage, reversing a lower bankruptcy court’s order that denied a debtor the use of a personal property exemption (“wildcard exemption”) in his Florida chapter 13 bankruptcy.

playing-cards-4-756323-mIn states that provide for them, wildcard exemptions allow a bankruptcy debtor to keep some nonexempt personal property out of the bankruptcy, up to a value that is established in the statute. Wildcard exemptions enable bankruptcy debtors to keep some important property or family heirlooms out of the reach of the bankruptcy process.

This Request for a Wildcard Exemption was Denied

The debtor in Valone v. Waage was denied the use of the Florida wildcard exemption by the bankruptcy court, which ruled that he had received the benefits of the homestead exemption and was therefore not eligible for the wildcard exemption.

A homestead exemption prevents bankruptcy creditors from forcing the sale of the debtor’s home, and Florida law does not allow the debtor the benefits of both a homestead exemption and the wildcard exemption. The debtor in Valone did not expressly claim the homestead exemption, but since his Chapter 13 bankruptcy did not allow for his home to be taken by creditors, the bankruptcy court found that he was receiving the benefits of the homestead exemption and denied his wildcard exemption request.

Chapter 13 Protects the Home Without Invoking the Homestead Exemption

The Court of Appeals disagreed with the lower courts’ interpretation of the applicable laws, ruling that a Chapter 13 debtor does not need to invoke a homestead exemption to protect their home. In a Chapter 13 bankruptcy, the debtor is allowed to keep their home and personal property if they agree to a monthly repayment plan. Liquidation of the debtor’s assets, including a house, is not even considered, so the homestead exemption is not triggered. It is the structure of Chapter 13 bankruptcy, and not the homestead exemption, that allows Chapter 13 debtors to stay in their homes. This means that Chapter 13 debtors should be allowed to claim a wildcard exemption if it is permitted by state law.

Are You Considering Bankruptcy?

If you or a loved one has been struggling to get out of debt, it may be time to consider bankruptcy and help to get your life back on track. There are different ways for a bankruptcy to proceed, and people considering bankruptcy should consult skilled and experienced legal counsel to be sure their case is handled in the most optimal way. The Louisville and Southern Indiana bankruptcy attorneys at the Schwartz Bankruptcy Law Center are experienced with relevant state and federal bankruptcy laws, and you can be confident in their skills. Contact us online or call 866-366-3328 to schedule a free consultation today.

More Blog Posts:

Florida Doctor Gets Prison Time for Bankruptcy Fraud after Concealing Assets from Bankruptcy Trustee, Kentucky Bankruptcy Lawyers Blog, published May 1, 2015.

Recently Released Analysis from Federal Reserve Research and Statistics Group Demonstrates The Pitfalls of Not Filing for Bankruptcy, Kentucky Bankruptcy Lawyers Blog, published March 14, 2015.

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