Passive Homestead Appreciation Not Subject to $125,000.00 Cap

Bankruptcy Judge K. Rodney May from the Middle District of Florida held that the equity passively resulting from market appreciation is not to be counted towards the $125,000.00 cap placed by 11 USC 522 (p) on a homestead exemption for property "acquired" during the 1,215 prepetition period. In re Chouinard, 2006 WL 3873437 (Bankr. M.D. Fla.). The Court followed the holding of In re Rasmussen, 349 B.R. 747 (Bankr. M.D. Fla. 2006) that passive market appreciation is not an interest that a debtor "acquired" during the 1,215 period. See also In re Sainlar, 344 B.R. 669 (Bankr. M.D. Fla. 2006).

The Court further pointed out that there was nothing in the record that indicated that the debtors actively increased their equity by anything other than scheduled mortgage amortization payments. The regularly scheduled mortgage payments increased the debtors' equity only nominally. The rest of the increased equity was from market appreciation.

The Court was not required to reach the debtors' argument that they were entitled to each to a $125,000.00 cap for a total cap of $250,000.00, ie. similar to "exemption stacking", but noted that it found persuasive the holding in Rasmussen that each joint debtor is eligible to take the $125,000.00 amount for a total of $250,000.00 pursuant to 11 USC 522 (m) which provides that section 522 shall apply separately with respect to each debtor in a joint case.