- Case No. 12-50811 (5th Cir. March 5, 2014)
- AFFIRMED district court's rejection of debtor's argument that 11 U.S.C. 522 (c) & (l) and "snapshot rule" permanently exempted homestead and its proceeds from post-certification sale of exempted homestead. Relying on the holding of In re Zibman, 268 F.3d 298, 305, (5th Cir. 2001), and Texas law, the Fifth Circuit held that proceeds from sale of a homestead are conditionally protected for six months from creditors applied, notwithstanding the terms of 11 U.S.C. 522(c). The six month limit was an integral feature of Texas law on the date of filing and continues in effect even during the pendency of a bankruptcy case. The 5th Circuit reiterated that when claiming an exemption under state law, it is important to remember that "it is the entire state law applicable on the filing date that is determinative."
- Procedural context:
- Bankruptcy court made determination that proceeds from sale of homestead that were not reinvested into a new homestead within six months after sale as required by Texas law became nonexempt property and ordered that proceeds be distributed to estate's creditors. Debtor argued that once exemption is fixed at time of filing, the homestead is permanently exempted and any proceeds from the sale are also exempt. Debtor also argued that In re Zibman did not apply because it involved a pre-petition sale of a homestead, not post-petition sale. Debtor appealed to the district court. The district court affirmed holding that there was no distinction between pre- and post-petition sale of homestead and that six month reinvestment requirement applied in either instance, notwithstanding 11 U.S.C. 522(c).
- Debtor filed for bankruptcy and choose to exempt his homestead under Texas law because it gave him a greater protection. Subsequently, Debtor sold his homestead and used a portion of the proceeds on non-bankruptcy expenses and did not purchase a new homestead as required under Tex. Prop. Code 41.001(c), which states that proceeds from sale of homestead are not subject to seizure by creditors for six months after date of sale. Bankruptcy court determined that proceeds were therefore nonexempt property and ordered that proceeds be distributed to estate's creditors.
- Stewart, Chief Judge, and DeMoss and Clement, Circuit Judges.
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