In re: Kathy Ellen Richards -

Case Type:
Case Status:
22-8002 (6th Circuit, Aug 25,2022) Published
Acknowledging that exemptions are to be liberally construed on behalf of debtors, the Sixth Circuit BAP affirmed the bankruptcy court decision disallowing the debtor's claimed homestead exemption in proceeds from a residence sold pre-petition. The BAP found the phrase "uses as a residence" in the statute to be plain and controlling. Since the debtor was not using the sale proceeds as a residence on the petition date, the exemption did not apply. The BAP also held that the debtor's amended exemption did not moot her appeal.
Procedural context:
The trustee objected to the debtor's homestead exemption and the bankruptcy court sustained the objection. The debtor appealed but also amended to claim a wild card exemption in the proceeds. The debtor appealed. The trustee also argued that the amendment adding the wild card exemption mooted the appeal.
The debtor sold her home and deposited about $37,000 of net proceeds into her attorney's escrow account. Six days later, she filed a Chapter 7 bankruptcy and claimed an exemption of $25,150 in the proceeds pursuant to 11 U.S.C. Sec. 522(d)(1). The trustee objected to the exemption, arguing the statutory language creating the exemption did not extend to proceeds from a residence. The bankruptcy court sustained the objection and disallowed the exemption. Thereafter, the debtor asserted an exemption of approximately $11,000 under 11 U.S.C. Sec. 522(d)(5) (the "wild card" exemption), to which the trustee did not object.
Bauknight, Dales and Gustafson; Opinion by Gustafson

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