In Florida, it is well settled that a Chapter 7 debtor who does not claim or receive the benefit of the homestead exemption on his bankruptcy schedules is entitled to claim the “wildcard” exemption pursuant to Fla. Stat. § 222.25(4). The “wildcard” exemption provides that a debtor can exempt up to $4,000 in personal property if the debtor does not “claim or receive the benefit of” the homestead exemption under Article X, Section 4(a)(1) of the Florida Constitution. This issue recently came up in the context of a Chapter 13.
In Littleton , co-debtors filed a Chapter 13 bankruptcy petition. In their schedules, the co-debtors listed residential property valued at $127,000 with a mortgage of $140,000. The co-debtors chose not to claim the homestead exemption for the residential property. Instead, the co-debtors chose to exempt certain personal property pursuant to the “wildcard” exemption. In their Chapter 13 plan, the co-debtors proposed to retain the residential property and pay their mortgage outside of their plan.
The Trustee objected to the co-debtors’ election of the “wildcard” exemption and argued the co-debtors were in fact “receiving the benefit of” the homestead protection despite not claiming it in their schedules. The Court agreed with the Trustee and based its conclusion on the differences between a Chapter 7 and Chapter 13 case. In a Chapter 7, a debtor who chooses to retain his residence and claim the wildcard exemption is effectively surrendering his residence to the Trustee for administration. He is not “receiving the benefit of” the homestead exemption because non-exempt property automatically becomes property of the estate subject to administration by the Trustee in a Chapter 7 case. However, in a Chapter 13 case, the debtor’s residence never becomes subject to administration by the Trustee regardless of whether the exemption is claimed. Instead, all non-exempt property is retained and treated under a Chapter 13 plan, and the Trustee is merely tasked with ensuring the debtor’s performance under the plan.
Based on the fundamental differences between Chapter 7 and Chapter 13, the Court determined that a Chapter 13 debtor is not entitled to the “wildcard” exemption if the debtor retains his residential property, even if the debtor does not claim the homestead exemption.