The homestead exemption allows debtors in five states to purchase expensive homes and shield millions of dollars from their creditors. All too often, millionaire debtors take advantage of this loophole by buying mansions in states with unlimited exemptions like Florida and Texas, and declaring bankruptcy -- yet continuing to live like kings. Our amendment will generously cap the homestead exemption at $125,000 -- that is, it permits a debtor to keep $125,000 of equity in his home after declaring bankruptcy.
The Senate voted on our amendment last session 76-22 after rejecting an amendment that would have gutted our amendment by a vote of 69-29. That was the right thing to do then, and it is the right thing to do now.
Let me give you a few of the numerous examples of rich debtors taking advantage of this loophole:
Abe Gosman, a health care and real estate magnate, declared bankruptcy last week in Florida citing debts of over $233 million. Despite these debts incurred from business losses in Massachusetts and Rhode Island, he will hold onto his 64,000 square foot mansion in West Palm Beach on a street known as "Billionaire's Row."
This January, convicted Wall Street financier Paul Bilzerian filed bankruptcy for the second time while owing at least $140 million in debts, but still kept his $5 million, 37,000 square foot Florida mansion.
Movie star Burt Reynolds wrote off more than $8 million in debt through bankruptcy, but still held onto his $2.5 million estate, named Valhalla.
Sadly, those examples are just the tip of the iceberg. We asked the General Accounting Office to study this problem. They estimated that 400 homeowners in Florida and Texas -- all with over $100,000 in home equity -- profit from this unlimited exemption each year. And while they continue to live in luxury, they write off an estimated $120 million owed to honest creditors. A Brown University study estimated that 3% of all people who move to Texas and Florida are motivated by bankruptcy concerns. |
