469 B.R. 666
Bankr. S.D. Tex.2012Background
- Debtor John Carlew filed Chapter 7 on September 13, 2011; William G. West was appointed Chapter 7 Trustee.
- Debtor scheduled Insurance Proceeds ($73,000) from pre-petition settlement of a state court lawsuit arising from Hurricane Ike damage to his homestead, as exempt.
- Trustee objected to exemptions, initially to Insurance Proceeds under Tex. Ins.Code § 1108.051 and later to Texas homestead exemption; accounts also objected.
- State Court Lawsuit against TWIA included multiple claims (breach of contract, DTPA, good faith, fraud, Insurance Code, negligence, etc.); settlement paid Debtor $125,000, minus fees leaves $73,353.98 Insurance Proceeds.
- Debtor held the Insurance Proceeds pending exemption ruling; the court held a hearing on exemptions and ultimately ruled in favor of full exemption under Texas homestead provisions.
- Court concluded proceeds from the settlement are exempt as homestead-related property and that the six-month reinvestment provision does not apply absent a sale of homestead.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the Insurance Proceeds fully exempt under Texas homestead law? | Carlew: proceeds are exempt as homestead-related proceeds. | West: proceeds partially non-exempt due to multiple non-homestead claims and allocation issues. | Yes; Debtor may exempt all Insurance Proceeds under Tex. Prop. Code §§ 41.001-.002. |
| Should the proceeds be apportioned among multiple causes of action to determine exemption? | Carlew: no required apportionment; exemption should apply to the entirety. | West: allocation may be necessary if non-exempt claims exist. | No; allocation not required; exemption stands for entire proceeds. |
| Does the six-month reinvestment provision terminate the exemption since proceeds were held for longer than six months? | Carlew: six-month rule applies only to sale proceeds; not triggered here. | West: holding period could affect exemption status. | No; six-month provision applies only to sale proceeds; not triggered by receipt/holding of Insurance Proceeds. |
Key Cases Cited
- In re Swift, 129 F.3d 792 (5th Cir. 1997) (Texas liberal exemption construction; proceeds may substitute exempt property)
- Swayne v. Chase, 30 S.W. 1049 (Tex. 1895) (insurance proceeds take the place of lost homestead; all exempt when derived from policy)
- England v. FDIC (Matter of England), 975 F.2d 1168 (5th Cir. 1992) (six-month exemption applies only to proceeds of sale of homestead)
- In re Barbe, 2006 WL 2403826 (Bankr. E.D. La. 2006) (liberal homestead exemption extending to proceeds from insurance claim)
- Katz, Cent. Va. Cmty. Coll. v. Katz, 546 U.S. 356 (2006) (public rights and bankruptcy framework; core property-exemption questions within bankruptcy)