In Re Crandall
346 B.R. 220, 2006 Bankr. LEXIS 1457, 19 Fla. L. Weekly Fed. B 352 (2006)
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Rule of Law:
When the Bankruptcy Code's domicile requirements render a debtor ineligible to claim any state's exemptions, the debtor is entitled to claim the federal exemptions provided under 11 U.S.C. § 522(d) as a default. Additionally, under Florida law, a valid security interest in a vehicle requires a written security agreement, and merely noting a lien on the certificate of title is insufficient to create one.
Facts:
- Jennifer L. Crandall owned a 1999 Mercury Minivan valued at $4,360.00.
- Crandall was domiciled in New York for a portion of the 730 days preceding her bankruptcy filing, and for the longest portion of the 180-day period preceding that.
- Crandall subsequently moved to Florida and was domiciled there when she filed for bankruptcy on April 13, 2006.
- Because she had not lived in Florida for the full 730-day period prior to filing, she was ineligible to claim Florida's exemptions.
- The certificate of title for her minivan listed her boyfriend, Daniel Arrington, as a secured creditor holding a lien.
- Crandall and Arrington never executed a written security agreement creating the security interest for the vehicle.
Procedural Posture:
- Jennifer L. Crandall ('Debtor') filed a petition for bankruptcy in the U.S. Bankruptcy Court for the Middle District of Florida.
- On her Schedule C, the Debtor claimed her automobile as exempt under New York state law.
- The bankruptcy Trustee filed an objection to the Debtor's claim of New York exemptions.
- The Trustee also filed an amended motion to compel the Debtor to turn over the automobile to the bankruptcy estate.
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Issue:
When a debtor is ineligible to claim exemptions under the law of the state dictated by the 730-day domicile rule of 11 U.S.C. § 522(b)(3)(A), as well as the law of their current state of domicile, are they entitled to claim the federal exemptions provided in § 522(d)?
Opinions:
Majority - Williamson, J.
Yes. If the effect of the Bankruptcy Code's domiciliary requirement is to render a debtor ineligible for any state's exemptions, the federal exemptions outlined in section 522(d) apply. The court reasoned that the 730-day look-back rule in § 522(b)(3)(A) pointed to New York law as the applicable source for the Debtor's exemptions. However, New York law requires a debtor to be domiciled in New York at the time of filing to claim its exemptions. Since the Debtor was domiciled in Florida at the time of filing, she was ineligible for New York exemptions, and the 730-day rule made her ineligible for Florida exemptions. This ineligibility triggers the 'hanging paragraph' of § 522(b)(3), which explicitly provides that in such a situation, the debtor may claim the federal exemptions. The court also found the purported lien on the Debtor's vehicle invalid because, under Florida law, a security interest requires a written agreement, and merely recording a lien on the certificate of title does not create one.
Analysis:
This case clarifies the application of the 'hanging paragraph' in 11 U.S.C. § 522(b)(3), which functions as a federal safety net for debtors who fall into a jurisdictional gap due to recent interstate moves. The decision establishes that when the Code's complex domicile rules and specific state-law residency requirements conflict, leaving a debtor with no available state exemptions, the federal exemptions become the default. This prevents a debtor from being unfairly penalized for relocating and ensures a minimum level of asset protection. It provides a clear precedent for bankruptcy courts to follow in similar cases involving mobile debtors.
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