Does Constitutional Homestead Protect Non-Debtor Spouse?

A married man used exempt money from his retirement funds to pay off a $400,000 mortgage on his homestead. Within three years thereafter, the same man filed Chapter 7 bankruptcy. The Chapter 7 trustee is challenging the man’s homestead exemption because he (the debtor) obtained $400,000 equity within 1215 days of filing bankruptcy. Can the man’s non-filing spouse exert her homestead interest to save the house?

In this instance, the homestead is titled in the debtor’s name so that the debtor cannot assert a tenants by entireties exemption for the property. The Trustee believes that only the person on title to the home may assert the Constitutional homestead exemption, and that the trustee can liquidate the house for the benefit of the creditors over the wife’s objection.

In my opinion, the wife may use the Constitutional homestead protection to shield the property notwithstanding the owner husband’s payoff of the mortgage. Florida courts have repeatedly stated that the Constitutional homestead protection is intended to protect not only the owner but the owner’s family. Courts have explained that the public policy of this exemption is“encouraging property ownership and independence on the part of the citizen and by preserving a home where a family may be sheltered and live beyond the reach of economic misfortune.” The Florida Supreme Court has stated that Constitutional homestead protects not only the debtor but the debtor’s family and the State.

I think most court’s would protect the spouse even though she is not on title and prohibit the sale of the family home.

The post Does Constitutional Homestead Protect Non-Debtor Spouse? appeared first on Orlando Bankruptcy Law Blog.