In Re Jevne

Citations: 387 B.R. 301; 21 Fla. L. Weekly Fed. B 282; 59 Collier Bankr. Cas. 2d 838; 2008 Bankr. LEXIS 1058Docket: 19-12070

Court: United States Bankruptcy Court, S.D. Florida.; April 2, 2008; Us Bankruptcy; United States Bankruptcy Court

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The United States Bankruptcy Court for the Southern District of Florida addressed the Trustee Michael R. Bakst's Objection to the claimed exemptions of Debtors John H. and Monique P. Jevne regarding their Florida residence and two motor vehicles in a hearing held on February 13, 2008. The Debtors filed for Chapter 7 bankruptcy on October 31, 2007, after moving to Florida from Rhode Island. They purchased a property in Vero Beach, Florida, for $325,000 and valued it at $292,500 on their Schedule A. They disclosed a first mortgage lien of $256,900.47 on the property and claimed an exemption under Rhode Island Statutes, which allows a $300,000 homestead exemption.

The Debtors also listed two vehicles: a 2000 Volvo S70 valued at $7,505 and a 2006 Chevrolet Trailblazer valued at $16,440, with no liens attached. Initially, they claimed a $10,000 exemption for each vehicle but later amended their claim to a total of $20,000. However, the total value of the vehicles exceeded the exemption permitted under Rhode Island law by $3,945.

Jurisdiction was established under 28 U.S.C. 1334(b), with the proceedings classified as core under 28 U.S.C. 157(b)(2)(B). The Court noted significant changes to the exemption laws enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005, which altered the determination of exemptions based on a debtor’s domicile over the preceding 730 days, in an effort to prevent forum shopping by debtors seeking more favorable exemptions.

Under the amended 11 U.S.C. § 522(b)(3)(A), a debtor must be domiciled in a state for 730 days to utilize that state's property exemptions, extending the previous requirement of 180 days. If the debtor has not maintained a single domicile for 730 days, the state law applicable is determined by the state where the debtor was domiciled for the 180 days prior. Despite this change, the determination of venue for filing a bankruptcy petition remains based on the debtor's residence during the 180 days immediately preceding the case, as stipulated by 28 U.S.C. § 1408.

The amendment raises questions about the extraterritorial application of state homestead exemptions. Courts must now interpret state exemption laws to assess whether a state's homestead law applies to property located outside the state. Some states, such as Alaska and Colorado, have statutes that explicitly limit homestead exemptions to property within the state. Conversely, in states where the statutes are silent on extraterritoriality, courts have sometimes ruled that these exemptions do not extend beyond state borders. For example, Kansas courts have determined that their homestead laws do not apply outside the state, while other jurisdictions like New Hampshire have allowed for such application based on the absence of restrictive language in their statutes.

Additionally, the Eighth Circuit's ruling in In re Drenttel confirmed that Minnesota's homestead exemption could apply to a debtor's property located in Arizona due to the lack of explicit territorial limitations in Minnesota law. Similarly, the Ninth Circuit in In re Arrol upheld that California's homestead exemption applied to property in Michigan. Overall, the interpretation of homestead exemptions continues to vary significantly based on state law and judicial rulings regarding extraterritorial applicability.

The Arrol court determined that California's homestead exemption is not limited to properties within the state, emphasizing a liberal interpretation of exemption statutes favoring debtors. Similarly, the In re Stratton ruling upheld that a debtor's California residence could be exempt under Oregon’s homestead statute, which lacked explicit extraterritorial restrictions, reinforcing the policy of liberal construction for homestead exemptions.

If a state's homestead statute explicitly limits its application to in-state properties, that statute cannot be applied extraterritorially. Conversely, if a statute is silent on this matter, the court will refer to the state's case law to ascertain whether extraterritorial application is permissible. In the absence of relevant case law, the court may extend the statute's application beyond state borders, in line with the liberal interpretation favored by the Eighth and Ninth Circuits.

In the current case, the Debtors' Florida property is claimed under Rhode Island's homestead law, as they do not qualify for Florida exemptions due to insufficient residency. The Trustee objects to applying Rhode Island’s homestead exemption to the Florida property, arguing it only pertains to real estate within Rhode Island. He cites In re Schlakman, which held that Florida's homestead law applies exclusively to in-state properties, despite its language being ambiguous on extraterritorial claims. Schlakman noted that the debtor had been a Florida resident long enough to qualify for Florida exemptions, contrasting with the current situation where Rhode Island's homestead exemption's extraterritorial applicability must be assessed under the new choice of law provisions of 522(b)(3)(A).

Rhode Island General Laws, § 9-26-4.1, does not explicitly address its extraterritorial applicability; however, due to a strong policy favoring debtors' exemptions, the Court concludes that the homestead exemption extends to the Debtors' residence in Florida. The Trustee initially objected to the Debtors' vehicle exemptions due to a lack of evidence of joint ownership and argued against aggregating the exemptions for multiple vehicles. Subsequently, the Trustee acknowledged seeing titles confirming joint ownership and conceded that Rhode Island law allows for the stacking of exemptions, permitting a total of $20,000 for the vehicles. Disputes remain regarding the value of the 2006 Chevrolet Trailblazer, with the Trustee seeking its turnover for sale, allowing the Debtors to claim their exemption from the sale proceeds. The Trustee is open to an arrangement for the Debtors to pay the equity exceeding their exemptions, contingent on reaching an agreement on the vehicle's value. Without such an agreement, an evidentiary hearing will be necessary to assess the vehicle's value and resolve the Trustee's turnover request. The Court orders that the Trustee's objection to the homestead exemption is overruled, affirming its extraterritorial applicability, and directs parties to arrange an evidentiary hearing if value disputes persist regarding the Chevrolet Trailblazer.

The Court acknowledges the filing of a Stipulation of Facts related to the Trustee's Objection to Claimed Exemptions and Application for Turnover (C.P.#46). Under 11 U.S.C. § 522(b)(3), a debtor can claim federal exemptions even if the state law requires residency for exemption rights or does not allow exemptions on out-of-state property. This is applicable in cases where the debtor's domicile is in an opt-out state. The case of In re Franklino is referenced, where it was stipulated that Rhode Island's homestead statute applied to Connecticut property, but the court did not address the validity of this stipulation. The primary issue was the debtor’s intent to reside in the property, and due to a lack of Rhode Island case law on this matter, the Court expressed a willingness to certify the question regarding the extraterritorial effect of Rhode Island Gen. Laws § 9-26-4.1 to the Rhode Island Supreme Court, although it noted the absence of a procedure to do so.