In re: Kathy Ellen Richards, 642 B.R. 777

Debtor sold her home six days before filing chapter 7 and placed the sale proceeds into an escrow account held by her counsel.
The sale generated $36,793.60; approximately $23,298.78 of those funds were the subject of the claimed exemption when the petition was filed.
Debtor elected the federal exemptions and claimed the proceeds exempt under 11 U.S.C. § 522(d)(1) (residence exemption).
Chapter 7 Trustee objected, arguing § 522(d)(1) applies only to property actually used as a residence at the petition date, not cash proceeds from a prepetition sale.
The bankruptcy court sustained the objection; Debtor amended Schedule C post-judgment to claim a § 522(d)(5) wildcard exemption for part of the funds and remitted the balance to the Trustee, then appealed.
The BAP held the appeal was not moot and affirmed the bankruptcy court: § 522(d)(1) does not exempt proceeds from a prepetition sale of a residence absent evidence the proceeds were intended for reinvestment in a residence the debtor would occupy.

Issue	Richards' Argument	Trustee's Argument	Held
Whether § 522(d)(1) permits exemption of proceeds from a prepetition sale of the debtor’s homestead	Proceeds are traceable and retain exempt status; "aggregate interest" covers converted proceeds; state homestead law supports exemption	§522(d)(1) covers property the debtor uses as a residence at filing; cash in escrow is not "used as a residence"	Denied. §522(d)(1) requires property actually used as a residence at the petition date; proceeds from a prepetition sale are not covered absent evidence of reinvestment/constructive occupancy.
Whether the appeal is moot or waived after Debtor amended Schedule C and turned part of the funds over	Amendment was a supplement to comply with the court’s order, not a waiver; Trustee still holds funds so appellate relief would be effective	Post-judgment amendment and turnover moot the controversy	Not moot. BAP can grant effective relief as Trustee still holds funds; amendment did not effect a waiver under these circumstances.

United States v. Ron Pair Enters., Inc., 489 U.S. 235 (statutory plain-meaning governs interpretation)
Bullard v. Blue Hills Bank, 575 U.S. 496 (finality rules for bankruptcy orders)
Mission Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652 (appellate relief not moot if court can undo effects of compliance)
Law v. Siegel, 571 U.S. 415 (bankruptcy courts cannot craft equitable exemptions beyond the Code)
In re Healy, 100 B.R. 443 (Bankr. W.D. Wis. 1989) (§522(d)(1) does not exempt proceeds of homestead sale)
In re Demeter, 478 B.R. 281 (Bankr. E.D. Mich. 2012) (construe exemptions liberally for debtors but §522(d)(1) requires present use as residence)
In re Zingale, 451 B.R. 412 (B.A.P. 6th Cir. 2011) (order sustaining objection to exemptions is final and appealable)