642 B.R. 208
Bankr. D. Conn.2022Background
- Elaine M. Cole purchased 17 Burrows Street, Mystic, CT, in 1995 and owned it through the chapter 7 petition date.
- Facing health and financial issues, Cole signed a listing agreement (Aug 23, 2021) and a sales contract (Sept 12, 2021) with a closing deadline of Dec 30, 2021; the sale closed Dec 23, 2021.
- Cole signed an 8‑month congregate-lease (effective Nov 1, 2021) and paid first-month rent Oct 27, 2021, and began moving some personal property in November 2021.
- Cole filed chapter 7 on Nov 22, 2021 (after the Oct 1, 2021 statutory amendment) and claimed a $250,000 homestead exemption under the 2021 amendment.
- The chapter 7 trustee objected on factual grounds (Cole did not occupy/use the property as her primary residence on the petition date) and on legal grounds (the 2021 amendment should not apply to pre‑existing creditor claims).
- At hearing Cole credibly testified she continued to sleep, keep medications, cook, and otherwise occupy the Property through the petition date; the Court found the trustee did not meet his burden to rebut the exemption.
Issues
| Issue | Trustee's Argument | Cole's Argument | Held |
|---|---|---|---|
| Whether the Property was "occupied"/the debtor's "primary residence" on the petition date | Pre‑petition sale contract, lease for a different unit, moving and sale of furniture show intent to abandon and not occupy the Property | Despite these actions, Cole continued to sleep, cook, keep meds, and treat the Property as home through the petition date | Court held Cole occupied the Property and it was her primary residence on the petition date; trustee failed to rebut exemption presumption |
| Whether the 2021 amendment to CT homestead exemption applies to pre‑enactment debts (retroactivity) | The Original 1993 act was applied only prospectively; by analogy the 2021 amendment should apply only to debts arising on/after Oct 1, 2021 | The 2021 Act repealed the Original Act, omitted the Original Act’s limiting clause, and merely increased the exemption amount — showing legislative intent for immediate application | Court held the 2021 amendment applies retroactively to pre‑existing claims (debtor entitled to $250,000) |
| Whether retroactive application violates the Contracts Clause | Increasing exemption would substantially impair creditors’ contractual expectations when they extended credit | Prior Connecticut exemption existed since 1993; increase does not eliminate an entire class of property from creditors; public remedial purpose | Court held no substantial impairment under Sveen/Hayward framework; Contracts Clause not violated by retroactive application |
Key Cases Cited
- In re Maresca, 982 F.3d 859 (2d Cir. 2020) (describing Connecticut homestead exemption requires owner‑occupied primary residence)
- KLC, Inc. v. Trayner, 426 F.3d 172 (2d Cir. 2005) (exemptions construed liberally in favor of debtors)
- Sveen v. Melin, 138 S. Ct. 1815 (2018) (two‑step Contracts Clause test: substantial impairment then scrutiny of purpose/necessity)
- CFCU Cmty. Credit Union v. Hayward, 552 F.3d 253 (2d Cir. 2009) (upholding increased homestead exemption against Contracts Clause challenge)
- In re Duda, 182 B.R. 662 (Bankr. D. Conn. 1995) (applying the 1993 Original Homestead Act prospectively)
- In re Morzella, 171 B.R. 485 (Bankr. D. Conn. 1994) (sustaining trustee objection under the Original Act; Original Act limited to post‑effective‑date claims)