(a) A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt—

(16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case;

Short answer: for as long as the homeowner is on the deed, that homeowner is responsible for fees and assessments arising after the bankruptcy. All pre-bankruptcy fees or assessments are discharged as provided by in each bankruptcy chapter.

In Osbourne v. Dumoulin, __ Fla. ___ (February 3, 2011), the Florida Supreme Court held that debtors in bankruptcy who indicate an intent to surrender their homestead property do not "claim or receive" the benefit of the constitutional homestead exemption, and therefore, will generally be eligible to receive the statutory personal property exemption.  The Court found this result even where the debtor has no immediate plans to move out of the home. The issue was framed by the Court as follows:

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 Court answered: No.

However, the Court allowed that the "claim or receive" analysis was a factual one, and that cases must be decided on a case-by-case basis:

As several courts have explained, each case must be decided on its own facts because the debtor in bankruptcy may still receive the homestead examption's protections despite failing to assert the homestead exemption. In re Bennett, 395 B.R. at 790 ("A debtor who does not claim the Homestead Exemption may still receive its benefits in certain limited circumstances that can only be determined on a case-by-case basis, after a fact-intensive inquiry.").

By way of an example, the opinion cites In re Hernandez, 21 Fla. L. Weekly B299, B300 (Bankr. S.D. Fla. Apr. 10, 2008), for the proposition that a married debtor filing alone whose home remained exempt from forced sale pursuant to the homestead protection because his nonfiling spouse retained protected homestead status nevertheless received the benefit of the constitutional protection, and could not claim the statutory personal property exemption (the "wildcard").

The holding makes clear that if the trustee's ability to administer the property is not impeded or obstructed by the homestead exemption, the debtor may claim the additional $4,000 statutory personal property exemption:

[W]here a debtor in bankruptcy elects not to claim the article X, section 4, homestead exemption and the trustee's administration of the bankruptcy estate is not otherwise obstructed by the existence of the homestead exemption, the debtor does not receive the benefits of the homestead exemption and may claim the section 222.25(4) personal property exemption of $4000.

Finally, the fact that a debtor is eligible for homestead protection, or that any equity in the homestead may be subsumed by a mortgage does not affect the analysis of the trustee's ability to administer the estate:

[W]hether a debtor in bankruptcy could claim the homestead exemption, previously received the benefits of the homestead exemption, or may receive such protection after discharge from bankruptcy does not constitute receiving the benefits of the article X homestead exemption within the meaning of the personal property exemption.

Therefore, my evaluation is that this decision is favorable to debtors. If a debtor in an underwater mortgage declares an intent to surrender their homestead on their bankruptcy petition, and claims the $4,000 (or $8,000 for couples) additional wildcard exemption, the burden would seem to be on the objecting trustee to prove that factual circumstances exist that would "obstruct" the trustee's ability to administer the homestead property, even if there is no practical reason for the trustee to administer it (such as because it is fully secured).

Update 4-26-2011: Trustees are responding to this ruling by taking steps to force debtors to either move out or give back the wildcard exemption. For example, some trustees are requiring debtors who remain in their homes to pay rent to the estate, or turn over the keys to the property. At least one trustee that I am personally aware of has hired a real estate broker to try to short sell these properties.

You can download the full opinion here.

To put it into dollar terms, say he earns $100,000 in annual salary and she earns $45,000. In the six months before filing, he could save as much as $35,000 in his wage account (after taxes). She might save $15,750 in her wage account. Upon filing bankruptcy, the entire $35,000 of his wages is exempt, and $11,812.50 of her wages are exempt. I.e., they keep $46,812.50 and give up $3,937.50.

Here’s how it works. Florida Statute § 222.11 provides the more or less well-known “head of family” exemption in sections 222.11(2)(a) or (b), which exempts the entirety of the six months of wages.  The wages must be “traceable” (hence the desirability for a separate wage account to make tracing easier).  The head of family must provide at least 50.1% (more than half) of the support of a dependent.

Note that the dependent does NOT need to live with the head of family.

Less well-known is the provision of § 222.11(c), which allows that the “[d]isposable earnings of a person other than a head of family” are exempt up to the limits of the Consumer Credit Protection Act, which allows garnishment of a maximum of 25% of the person’s wages. Therefore, a non head of family’s wages are 75%, exempt. Thus, the second earner’s wages are substantially exemptible just as are the head of the family’s.

With intelligent planning prior to filing, a two-earner family can protect a substantial amount of wage income.  By living off non-exempt savings or other non-exempt funds, and saving their wages, the couple can legally exempt a large portion of their pre-bankruptcy earnings at the time of filing.

Note finally that the § 222.11(2)(c) exemption is available even where there are no dependents, such as for a person who lives alone.

As always, this information should not be construed as legal advice, because every individual case is different. You should consult your bankruptcy attorney for specific application of exemptions to your case.

In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in "foreclosure expert" jobs with no formal training, a Florida lawyer says.

In depositions released Tuesday, many [mortgage servicer] workers testified that they barely knew what a mortgage was. Some couldn't define the word "affidavit." Others didn't know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers' accusations about document fraud.

The deposed employees worked for the mortgage service divisions of banks such as Bank of America and JP Morgan Chase, as well as for mortgage servicers like Litton Loan Servicing, a division of Goldman Sachs.

It is hard to predict exactly how this disastrous situation is going to be resolved. But I predict one thing for certain: an entire new gigantic round of litigation is in the offing, and judges who looked the other way when these bad mortgages were first in front of them will now have to deal with even more time-consuming litigation over the fraud. There is a lesson here for some members of our judiciary: ignoring problems does not make them go away, but only makes them worse. Instead of dealing with a bunch of annoying garden lizards, the courts will now have to deal with an army of hungry dinosaurs.

For just a taste of the chaos that is on its way, consider the penultimate paragraph from the article I cited above:

Meanwhile, the public outrage continues to mount. In what is perhaps a sign of things to come, a Simi Valley, Calif., couple and their nine children broke into their foreclosed home over the weekend and moved back in, according to television station KABC of Simi Valley. The couple, Jim and Danielle Earl, say they were working with the bank to catch up on payments until they discovered a $25,000 difference between what they owed and what the bank said they owed. The family was evicted from their Spanish-style two-story in July. The home has been sold, and the new owner was due to move in soon.

If you have been foreclosed, call us today. You may be entitled to compensation if your mortgage included fraudulent documents.

The bill would have required federal and state courts to recognize documents that were notarized in other states.

Both congressional chambers approved the legislation by voice votes, a move used for noncontroversial bills. The House passed it in April, and the Senate passed it Sept. 27.

...The bill aimed to clear up congestion in the courts by forcing courts to recognize notaries from other states, even if the records included electronic signatures.

This would have mooted the allegations of fraud against the banks for allegedly fraudulently preparing documents purporting to show their ownership in foreclosed loans. Because federal law trumps state law, Congress could order the states to recognize the out-of-state documents as notarized properly, whether or not that was in fact the case.

Fortunately, President Obama vetoed the voice-only vote using a less common method of veto:

"So out of an abundance of caution and to ensure that those unintended effects don't harm consumers, the president will send the bill back and believes that Congress did not intend for those unintended consequences to be in the legislation," [Obama spokesman Robert] Gibbs said.

Source article here.

September 20, 2010

Chief Justice Charles T. Canady

Florida Supreme Court
500 South Duval Street
Tallahassee, FL 32399-1900

Dear Chief Justice Canady,

I am disturbed by the increasing reports of predatory ‘foreclosure mills’ in Florida. The New York Times and Mother Jones have both recently reported on the rampant and widespread practices of document fraud and forgery involved in mortgage assignments. My staff has spoken with multiple foreclosure specialists and attorneys in Florida who confirm these reports.

Three foreclosure mills - the Law Offices of Marshall C. Watson, Shapiro & Fishman, and the Law Offices of David J. Stern - constitute roughly 80% of all foreclosure proceedings in the state of Florida. All are under investigation by Attorney General Bill McCollum. If the reports I am hearing are true, the illegal foreclosures taking place represent the largest seizure of private property ever attempted by banks and government entities. This is lawlessness.

I respectfully request that you abate all foreclosures involving these firms until the Attorney General of the state of Florida has finished his investigations of those firms for document fraud.

I have included a court order, in which Chase, WAMU, and Shapiro and Fishman are excoriated by a judge for document fraud on the court. In this case, Chase attempted to foreclose on a home, when the mortgage note was actually owned by Fannie Mae.

Taking someone's home should not be done lightly. And it should certainly be done in accordance with the law.

Thank you for your consideration of this request.

 

Sincerely,

 

Alan Grayson

Member of Congress