Brown v. Ellmann (In re Brown)

Case Type:
Case Status:
16-1967 (6th Circuit, Mar 20,2017) Published
Section 522 will not support an exemption on the basis of state-law redemption rights in a piece of property if the proceeds from the sale of that property are insufficient to satisfy the prior obligations owed to the secured creditors. Parties alleging statutory mootness under § 363(m) are required to prove that the reviewing court is unable to grant effective relief without affecting the validity of the sale in addition to proving that the appellant failed to obtain a stay of the order and that the property has already been conveyed to a bona fide purchaser for value.
Procedural context:
The bankruptcy court denied a chapter 7 debtor's request for exemptions under §§ 522(d)(1) and (2). The district court affirmed. The 6th Circuit reviewed the bankruptcy court’s legal conclusions de novo giving no special deference to the district court’s decision and affirmed. The 6th Circuit held that any exemption on the basis of the value of the debtor’s redemption rights must attach to some equity held by the debtor after satisfaction of the secured liens on the property. Absent such equity, the debtor had no interest to which the claimed exemption could attach.
Debtor filed chapter 7 and disclosed her ownership of a residence in Ypsilanti, Michigan valued at $170,000 and subject to $219,000 in secured mortgage claims held by two separate creditors. Debtor’s initial petition stated her intent to surrender her residence to the bankruptcy estate and she did not claim any exemptions for the value of her redemption rights under Michigan law. The bankruptcy court granted Brown a discharge. The trustee sought authorization to sell the residence for $160,000 and distribute the proceeds. Debtor objected and sought to amend her original filing to claim exemptions for the value of the redemption rights under Michigan law.
Merritt, Kethledge, White (Merritt)

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