491 B.R. 440
Bankr. W.D. Tex.2013Background
- Debtor filed Chapter 7 on Oct 5, 2009; Fernea obtained state court judgment for securities fraud against Debtor; Fernea and Trustee object to Debtor’s homestead exemption under 11 U.S.C. §522(q).
- Debtor’s Schedule A/C valued homestead at $530,000 with claims and encumbrances far below that; spouse Diana Bounds runs DLB Industries and has significant income.
- Texas homestead law provides unlimited exemption; BAPCPA added a cap in §522(q) for certain wrongdoing, including securities violations.
- Jury verdict in state court found Debtor liable for fraud and securities violations; judgment filed in bankruptcy case; §523(a)(19) dischargeability action related to these acts.
- Court adopts Kim and Presto framework; non-debtor spouse generally cannot stack exemptions; property becomes part of the estate under §522(q).
- Court values homestead at $530,000 (via Dub Smith appraisal) and holds equity exceeds $136,875 cap; proceeds may be used to pay allowed exemptions and trusteeship may proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 522(q) caps homestead exemption due to securities violations | Trustee/Fernea: cap applies; excess is estate | Bounds: savings clause protects home | Exemption capped; equity exceeds cap; proceeds estate use allowed |
| Who bears the burden to prove 522(q) validity | Trustee/Fernea bear burden | Debtor bears exemption validity | Trustee and Fernea carry the burden by preponderance |
| Whether the homestead value exceeds cap after liens | Value exceeds cap; debtors liable | Value contested but likely under cap | Court finds value $530,000; exceeds cap; equity non-exempt |
| Whether savings clause 522(g) precludes estate treatment | Savings clause supports exemption | Savings clause does not override estate transfer | Savings clause does not preclude treating homestead as estate asset under 522(q) |
| Whether non-debtor spouse can stack or claim separate exemption | Kim allows stacking in some contexts | Non-debtor spouse cannot stack under 522(q) | Non-debtor spouse cannot claim separate stacking exemption; only debtor may exempt |
Key Cases Cited
- In re Kim, 405 B.R. 179 (Bankr.N.D.Tex.2009) (community property becomes estate; federal law controls exemptions under 522(b)(3); non-debtor cannot stack)
- In re Presto, 376 B.R. 554 (Bankr.S.D.Tex.2007) (court need not compute non-exempt value; debtor retains $136,875 exemption; rest estate)
- Carmichael v. Osherow (In re Carmichael), 100 F.3d 375 (5th Cir.1996) (discretion to determine support necessary to prevent asset stashing)
- Matter of Norris, 413 F.3d 526 (5th Cir.2005) (savings clause context; exempting to support dependents balancing interest)
- Jackson v. Novak, 593 F.3d 171 (2d Cir.2010) (considerations for reasonably necessary standard in savings clause context)
- In re Sissom, 366 B.R. 677 (Bankr.S.D.Tex.2007) (discussion of exemptions and 522(p)/(q) interplay)