LANDMARK BANKRUPTCY RULING LIMITS FLORIDA'S
October 7, 2005A bankruptcy ruling today in the Southern District of Florida, has set a precedent for limiting the long standing "unlimited" Florida homestead exemption. It is the first such ruling in Florida under the new federal bankruptcy law enacted earlier this year.
First signed into law by President Bush on April 20, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act placed a number of limits on state homestead exemptions. One of them is a $125,000 limit on the amount of equity a debtor may claim in a bankruptcy proceeding, as exempt under a state's homestead exemption, if that equity was acquired within 3 years and four months prior to bankruptcy. Any equity transferred from a previous residence is still exempt above and beyond the $125,000 limit.
On Tuesday, September 27, Thomas Messana, a bankruptcy attorney with the Ruden McClosky law firm, argued a case before Chief US Bankruptcy Judge Robert A. Mark in the Southern District of Florida resulting in a landmark decision for Florida homestead in bankruptcy. Messana represented Alan Goldberg, the Chapter 7 bankruptcy trustee of Elona Kaplan. The trustee objected to Ms. Kaplan's claim of exemption for her entire homestead under the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BACPAC") .
The only reported similar case since the law was enacted earlier this year was in Arizona, where the $125,000 cap was analyzed in a June 2005 ruling. In that case, the Arizona bankruptcy judge ruled that the $125,000 cap only applies to two states: Texas and Minnesota.
Ms. Kaplan argued that the Arizona ruling is the correct interpretation of the law. Messana, on behalf of the Trustee, argued that Floridians are subject to the $125,000 cap. Judge Mark agreed with Messana and ruled in the first Florida ruling on the subject--contrary to the Arizona court-- that the law does apply in the State of Florida.
The result of today's ruling is that residents of Florida who acquire over $125,000 of equity in their home within 3 years and four months prior to filing bankruptcy will not be able to claim more than $125,000 (plus any equity transferred from a previous residence) as exempt. The non-exempt portion of the home equity will be available to pay creditors of the bankrupt individual.
Thomas Messana is a member of the Firm's Bankruptcy and Corporate Reorganizations Practice Group. He concentrates his practice in bankruptcy, receiverships, assignments for the benefit of creditors, insolvency and financial restructuring, bankruptcy-related litigation, creditors' rights, corporate reorganization and out-of-court workouts. He represents corporations, financial institutions, individual and business debtors, secured, unsecured and priority creditors, creditors committees, bankruptcy trustees and entities seeking to acquire assets out of distressed situations. Ruden McClosky is a full-service law firm with offices throughout Florida including Ft. Lauderdale, Miami, Naples, Orlando, Port St. Lucie, Sarasota, St. Petersburg, Tallahassee, Tampa and West Palm Beach and one office in Caracas, Venezuela.
Opinion for Case 05-14491-BKC-RAM (PDF)
Written By Thomas M Messana