446 B.R. 850
Bankr. N.D. Ill.2011Background
- Trustee objects to debtor exemptions in two bank accounts and a table saw, with focus on savings at Associated Bank.
- Debtors sold their homestead on July 31, 2009 for $53,746.86 and deposited proceeds into Associated Bank.
- Debtors filed Chapter 7 on July 30, 2010 and claimed exemption in $9,000 remaining under Illinois statute 735 Ill. Comp. Stat. 5/12-906.
- Trustee argues exemption fails if no intent to reinvest in a new homestead or if more than one year passed since sale.
- Illinois 5/12-901 and 5/12-906 exempt proceeds for one year and reinvestment can preserve exemption; liberal construction favors debtors.
- Court concludes exemption applies based on petition date; no intent-to-reinvest requirement; post-petition passage of time does not bar the exemption in this case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does 5/12-906 require reinvestment or intent to reinvest for the proceeds to be exempt? | Lantz argues no intent requirement; proceeds exempt for one year regardless of reinvestment. | Trustee argues an implied intent requirement exists to reinvest in a new homestead. | No intent requirement; proceeds exempt without reinvestment intent. |
| Is the exemption determined as of the petition date despite post-petition time limits? | Exemption determined at petition; statute’s time limit does not defeat exemption if petition occurred within one year. | Zibman approach would freeze or expire the exemption post-petition. | Exemption determined at petition date; post-petition lapse does not bar exemption here. |
Key Cases Cited
- In re Ziegler, 239 B.R. 375 (Bankr. C.D. Ill. 1999) (implied intent discussion rejected; proceeds exemption viewed as extension of general homestead exemption)
- Stitt, 7 Ill.App. 294 (1880) (proceeds exempt for one year; reinvestment not conditioned on exemption)
- La Placa v. La Placa, 5 Ill. 2d 468 (1955) (reinvestment referenced as part of proceeds exemption language)
- In re Barker, 768 F.2d 191 (7th Cir. 1985) (exemption statutes liberally construed to protect debtors)
- In re Snowden, 386 B.R. 730 (Bankr. C.D. Ill. 2008) (snap-shot rule for exemptions; post-petition developments generally not controlling)
- In re Polis, 217 F.3d 899 (7th Cir. 2000) (determinants of exemption based on petition date even when later values change)
- In re Konnoff, 356 B.R. 201 (9th Cir. BAP 2006) (debtor rights determined by petition-date facts; concerns about post-petition windfalls)
- Golden, 789 F.2d 698 (9th Cir. 1986) (California proceeds exemption discussed; reinvestment policy noted)
- Owen v. Owen, 500 U.S. 305 (1991) (recognizes state exemption power with Bankruptcy Code constraints)
- Katchen v. Landy, 382 U.S. 323 (1966) (bankruptcy estate administration efficiency as a policy goal)