515 B.R. 395
Bankr. D. Mass.2014Background
- Debtor filed Chapter 7; Trustee objects to exemption of Proceeds Share from sale of former marital residence under Massachusetts homestead law.
- Property sold March 29, 2013; net proceeds ~$63,281; Debtor and spouse split proceeds and Debtor deposited ~$31,640.49 into a Cape Cod 5 account.
- Schedule B identifies the Cape Cod 5 funds as proceeds from the sale; Schedule C claims a Mass. Gen. Laws ch. 188, §4 automatic homestead exemption in the Proceeds.
- Trustee argues Proceeds are not exempt because they were not reinvested in a new home within one year, expiring under §11.
- Mass. law revised in 2010 to create an automatic $125,000 homestead and to treat sale proceeds as potentially protected, but with a time-limited effect if not reinvested; divorce proceedings in Probate Court trigger §6 protections for occupancy of the homestead by spouse and/or dependents pending adjudication.
- Court will continue the Trustee’s objection generally and consider whether post-petition expiration of the §11 period affects the exemption given §6 protections during divorce proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether sale proceeds remain exempt after §11’s one-year limit. | Lassman argues the exemption is fixed at filing under snapshot rule; post-petition expiration should not impact the exemption. | Williams contends the state law’s temporal limitation can vanish post-petition and cannot be overridden by §522(c). | Vanishing exemption favored; but §6 preserves proceeds pending Probate Court orders, so Exemption continues generally. |
| Whether §6 protects the Proceeds Share during ongoing divorce proceedings. | Trustee argues no special protection beyond §11’s expiration. | Debtor argues §6 preserves the homestead rights for the spouse and children pending Probate Court resolution. | §6 applies to maintain status quo for occupancy; exemption remains until Probate Court orders otherwise. |
| What is the correct interpretive approach for exemptions—snapshot vs entire state law in context? | Trustee urges entire state law as of petition date governs exemptions. | Debtor relies on Cunningham’s snapshot approach and argues post-petition events cannot undo properly claimed exemption. | Court adopts the “entire law” approach (Fifth/Ninth Circuit view) as better aligned with state-law scope and Bankruptcy Code policies. |
Key Cases Cited
- In re Cunningham, 513 F.3d 318 (1st Cir. 2008) (exemption immutability under §522(c) not subject to post-termination events under old statute)
- In re Weinstein, 164 F.3d 677 (1st Cir. 1999) (state exemptions preemption with federal exemptions; built-in limitations can be constrained by Code)
- In re Zibman, 268 F.3d 298 (5th Cir. 2001) (state exemptions’ built-in limitations may be respected within Code framework)
- In re Lantz, 446 B.R. 850 (Bankr.N.D. Ill. 2011) (vanishing exemptions analysis under post-petition events from state statutes)
- Owen v. Owen, 500 U.S. 305 (1991) (state exemptions’ scope determined by state law; preemption considerations when conflicts arise)
- Law v. Siegel, 134 S. Ct. 1188 (2014) (Supreme Court on overarching bankruptcy exemptions policy and state vs federal scope)