452 B.R. 726
Bankr. C.D. Ill.2011Background
- Ronald and Debra Stewart sold their homestead in Edwards, Illinois for $285,595 in March 2010; net proceeds and an escrow refund followed.
- Proceeds of $22,081.89 remained uncashed; $3,437.59 escrow refund also remained uncashed; both were held by the bank pending debtor instructions.
- Debtors filed Chapter 7 in June 2010; they claimed $30,000 of the proceeds as exempt under Illinois homestead proceeds exemption and sought wildcard exemption on the escrow refund.
- Trustee objected to the exemptions, asserting the one-year reinvestment condition (12-906) requires reinvestment in a new homestead and that the exemption should not apply if not reinvested by March 1, 2011.
- The one-year reinvestment period expired without reinvestment; the court held the escrow refund is not proceeds and denied exemptions in the two checks, ordering turnover to the Trustee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether escrow refund is exempt as proceeds | Stewart | Trustee | Escrow refund not exempt as proceeds |
| Whether reinvestment is required as a condition of the proceeds exemption | Stewart | Trustee | Reinvestment condition is a state-law requirement underpinning the exemption |
| Whether intent to reinvest must be proven to claim the exemption | Stewart | Trustee | Intent to reinvest need not be proven |
| Whether the snap-shot doctrine applies to Illinois expiring homestead exemptions in bankruptcy | Lantz/Snowden | Stewart | Snap-shot doctrine does not apply; continue reinvestment period governs |
| Impact of bankruptcy on the proceeds exemption and turnover to trustee | Stewart | Trustee | Proceeds are property of the estate; turnover to trustee permitted where exemption expires or is denied |
Key Cases Cited
- In re Ziegler, 239 B.R. 375 (Bankr.C.D.Ill. 1999) (debtor's intent not required to reinvest; context of statute)
- In re Snowden, 386 B.R. 730 (Bankr.C.D.Ill. 2008) (discussed intent vs. ex ante interpretation of statute)
- In re Lantz, 446 B.R. 850 (Bankr.N.D.Ill. 2011) (rejects snap-shot doctrine for expiring homestead exemptions)
- In re Golden, 789 F.2d 698 (9th Cir. 1986) (rejects snap-shot for expiring California exemption)
- In re Zibman, 268 F.3d 298 (5th Cir. 2001) (rejects snap-shot approach to Texas expiring exemption)