MONTE MASINGALE, ET AL V. JOHN D.
- Summarized by Michael Myers , Ballard Spahr LLP
- 1 year 7 months ago
- Case Type:
- Consumer
- Case Status:
- Reversed and Remanded
- Citation:
- 22-60050, 22-60053 (9th Circuit, Jul 26,2024) Published
- Tag(s):
-
- Ruling:
- A panel for the Ninth Circuit Court of Appeals reversed the decision of the Bankruptcy Appellate Panel holding that the debtor was allowed to exempt "100% of FMV" of a property as a homestead exemption because no party had objected to the exemption within 30 days of the 341 meeting. The panel distinguished from the Supreme Court decision in Taylor v. Freeland & Kronz, 503 U.S. 638 (1992).
- Procedural context:
- The individual debtors, a married couple, had initially filed a chapter 11 bankruptcy. They had claimed "100% of FMV" as a homestead exemption in Schedule C of their petition. They also filed and confirmed a chapter 11 plan which provided that the debtors were not asserting an exemption above the homestead exemption limits.
More than a year after the chapter 11 plan was confirmed, the case was converted to chapter 7. The chapter 7 trustee sought to sell the homestead property and pay creditors. The debtor objected, claiming that the full value of the property was exempt based on the claimed exemption in Schedule C and lack of objection thereto. The trustee was unable to object to the exemption following conversion because more than a year had elapsed since the confirmation of the chapter 11 plan [Fed. R. Bankr. P. 1019(2)(B)(i)].
- Facts:
- The debtors filed their chapter 11 bankruptcy in 2015. Schedule A of the debtors’ Chapter 11 petition listed their real property, including their home. The debtors claimed it was worth $165,430 and encumbered by a $130,724 mortgage. The debtors claimed a homestead exemption of “100% of FMV" even though it was undisputed that the maximum statutory exemption (under federal law) they could have claimed was $45,950. The chapter 11 plan and disclosure statement, in which representations were made that the debtors would not be asserting an exemption above the statutory limits, were filed before the end of the 30-day period to object to the claimed exemption. The chapter 11 plan was confirmed in August 2017.
In 2018, the debtors failed to file required financial reports and the United States Trustee moved to convert the case. The case was converted to a chapter 7 in November 2018. The value of the real property increased to over $400,000. In 2021, the debtor moved to sell the property and retain all the proceeds. Debtor withdrew the motion after the trustee and the State of Washington objected. The trustee subsequently sold the property for $422,000 and denied the debtor's motion to compel abandonment (based on the claimed exemption), finding that debtor was only entitled to the $45,950 exemption.
The bankruptcy estate currently held $357,022.94, of which $223,033.34 was derived from the sale of the homestead property. Debtor had not paid creditors much of anything and the homestead property was the main asset that could enable some amount of payment.
- Judge(s):
- Gould, Bress, and Koh
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