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Lowe v. Deberry, et al.

Selling a home after filing chapter 7 does not destroy the homestead exemption.

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Case Type:
Case Status:
17-50315 (5th Circuit, Mar 07,2018) Published
The proceeds from the post-petition sale of a house that was exempt on the petition date are likewise exempt and cannot be recovered by the debtor's trustee. The six month reinvestment safe harbor provision of the Texas homestead statute (Tex. Prop. Code 41.001(c)) does not alter (i) the rule that exemption is determined as of the petition date or (ii) the rule that proceeds from exempt property likewise are exempt.
Procedural context:
The bankruptcy court dismissed a complaint filed by the Chapter 7 trustee seeking to recover funds from the sale of a house that the debtor sold, with the bankruptcy court's permission, after he had filed a Chapter 7 petition and properly exempted his interest in the house. On appeal, the United States District Court for the Western District of Texas reversed the bankruptcy court. The debtor and the recipients of the sale proceeds appealed.
Appellant Curtis DeBerry owned a house in San Antonio (deep in the heart of Texas) and claimed it as exempt in his Chapter 7 bankruptcy case. Seven months later the bankruptcy court authorized DeBerry to sell his house. Rather than buying a new house, DeBerry transferred the proceeds to his wife and to his criminal attorneys. DeBerry's Chapter 7 trustee sued DeBerry, his wife, and his criminal attorneys, arguing that the funds from the sale of the properly-exempted house were not exempt because they were not reinvested in another house within six months of the sale.

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