Attorney Andrew Walker wins a court victory allowing a homeowner in Coon Rapids, and anywhere in Minnesota to keep home sale proceeds
Lawyer Andrew Walker just lately received a victory within the Stepp case. In that case, Mr. Walker efficiently argued that Minnesota legislation permits an individual who just lately offered a home to maintain the cash from promoting that home AND additionally to maintain one other home that the Debtor owned and is utilizing for his retirement.
The chapter trustee in that case determined to problem a MN Supreme Courtroom case from 1967 saying that somebody who just lately offered a home and moved into one other home could preserve the sale proceeds of the home they offered and in addition preserve the brand new home into which they moved. That case is named O’Brien v. Johnson 148 N.W.second 357 (1967). The fashionable chapter choose confirmed that rule of legislation within the In Re Stepp ruling 22-41617. This isn’t an official courtroom opinion, so I’ve copied the order beneath.
MEMORANDUM DECISION AND ORDER
This matter got here earlier than the Courtroom on a Movement and Amended Movement Objecting to Claimed Exemption and for Turnover (collectively, the “Movement”) [ECF Nos. 14, 181, filed by the chapter 7 trustee (the “Trustee”). Debtor filed a response to the Motion (the “Response”) [ECF No. 221 and Trustee filed a reply (the “Reply”) [ECF No. 241. The Court held a hearing on January 5, 2023, with appearances as noted on the record. This is a core proceeding under 28 U.S.C. § 157(b)(2), and this Court has jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334. Venue is proper pursuant to 28 U.S.C. § 1408(1). This memorandum decision is based on all the information available to the Court and constitutes the Court’s findings of fact and conclusions of law under Fed. R. Bankr. P. 7052, made applicable to this contested matter by Fed. R. Bankr. P. 9014(c). The Motion is denied in part, as explained hereinafter.
The facts in this case are straightforward. For several years prior to this case, Debtor owned a primary residence in Coon Rapids, Minnesota (the “Minnesota House”) and a second home in Grantsburg, Wisconsin (the “Wisconsin House”). [ECF No. 14, ¶¶ 7, 9; ECF No. 22, at 3.] Debtor opted to promote the Minnesota Home and preserve the Wisconsin Home. [ECF No. 22, at 3.] He signed a purchase order settlement for the Minnesota Home in July 2022 and the transaction closed on September 20, 2022 (such date is the “Closing Date”, and the interval between signing the acquisition settlement and the Closing Date is known as the “Interim Interval”). [ECF No. 14, ¶¶ 7, 9; ECF No. 22, at 3.] Debtor acquired a cashier’s test for $15,892.34 on the Closing Date, representing proceeds of the sale of the Minnesota Home (the “Sale Proceeds Test”). [ECF No. 14, ¶ 10; ECF No. 22, at 3.]
On September 28, 2022 (the “Petition Date”), Debtor filed a voluntary petition and indicated the Wisconsin Home is his present residence. [ECF No. 1.] In his amended schedules, Debtor claimed the Wisconsin Home as an exempt homestead property pursuant to Minn. Stat. §§ 510.01, 510.02. [ECF No. 21, at 11.] He additionally claimed the Sale Proceeds Test as exempt homestead proceeds pursuant to Minn. Stat. § 510.07. [ECF No. 21, at 12.]1 The Trustee objected to the second exemption and demanded turnover of the Sale Proceeds Test.
The dispute facilities on two questions. First, the Trustee argues that “double exemptions” underneath are prohibited underneath Minn. Stat. §§ 510.01 and 510.07. Within the various, the Trustee argues that Debtor “deserted” the Minnesota Home earlier than the Closing Date and thus forfeited an exemption underneath Minn. Stat. § 510.07 for the Sale Proceeds Test. The primary query is clearly matter of legislation. Within the curiosity of financial system, and on the request of the events, the Courtroom agreed to resolve this difficulty promptly after the listening to. The second difficulty is probably a combined query of legislation and reality, and the Courtroom will difficulty a separate order to set it on for an evidentiary listening to.
I. Minnesota Legislation doesn’t Prohibit “Double Exemptions” for a New
Homestead and Sale Proceeds of a Prior Homestead.
Debtors are permitted to exempt sure property from the chapter property. 11 U.S.C. § 522(b). “Usually, a debtor is permitted to decide on between the scheme of federal exemptions prescribed in part 522(d) of the chapter code or the exemptions accessible underneath different federal legislation and the legislation of the state wherein the debtor is domiciled.” In re Sawyers, 2 F.4th 1133, 1137 (eighth Cir. 2021) (inside quotations omitted). If, nevertheless, a debtor strikes to a brand new state earlier than submitting for chapter, he should make the most of the state legislation exemptions of his prior state of residency. 11 U.S.C. § 522(b)(3)(A). Debtor moved from Minnesota to Wisconsin lower than 100 days earlier than the Petition Date, so Minnesota legislation applies.
Minnesota has an exemption for a homestead, outlined as: “the home owned and occupied by a debtor because the debtor’s dwelling place, along with the land upon which it’s located . . .” Minn. Stat. § 510.01; see additionally Minn. Stat. § 510.02 (setting statutory limits on the acreage and worth of the exemption). Minnesota additionally permits the sale of a homestead, and it has an exemption on the market proceeds:
The proprietor could promote and convey the homestead with out subjecting it, or the proceeds of such sale for the interval of 1 12 months after sale, to any judgment or debt from which it was exempt within the proprietor’s arms, besides that the proceeds of the sale aren’t exempt from a judgment or debt for a courtroom ordered little one help or upkeep obligation in arrears.
Minn. Stat. § 510.07. Minnesota’s exemptions are rooted in its structure and liberally construed by its courts. Vickery v. First Financial institution of LaCrosse, 368 N.W.second 758, 762 (Minn. App. 1985) (citing Minn. Const., artwork. 1, § 12; Denzer v. Prendergast, 126 N.W.second 440, 443 (Minn. 1964); Jensen v. Christensen, 11 N.W.second 798, 799 (Minn. 1943)). In chapter, courts additionally construe exemptions in favor of debtors. In re Hardy, 787 F.3d 1189, 1192 (eighth Cir. 2015); accord Legislation v. Siegel, 571 U.S. 415, 424 (2014)( “[T]he courtroom could not refuse to honor the exemption absent a sound statutory foundation for doing so.”) The events agree the Wisconsin Home is exempt pursuant to Minn. Stat. § 510.01. However they dispute Debtor’s entitlement to an exemption pursuant to Minn. Stat. § 510.07. Trustee argues Debtor can’t declare an exemption in each the Sale Proceeds Test and the Wisconsin Home as of the Petition Date for a similar motive he couldn’t have homestead standing for 2 homes as of the Petition Date. [ECF No. 18, at 2.] This argument could have an preliminary intuitive enchantment, however it’s a false analogue. Debtor isn’t claiming a homestead exemption for 2 homes. Minnesota legislation creates two totally different exemptions for a homestead property vs. proceeds from the sale of a previous homestead.
“[W]hen a debtor claims a state-created exemption, the exemption’s scope is set by state legislation.” Id. at 1196–97 (emphasis extant); accord In re Sholdan, 217 F.3d 1006, 1008 (eighth Cir. 2000); Mueller, 215 B.R. at 1022. The Minnesota Supreme Courtroom has thought-about and rejected the Trustee’s place that concurrent exemptions underneath Minn. Stat. §§ 510.01 and 510.07 are prohibited underneath Minnesota legislation. O’Brien v. Johnson, 148 N.W.second 357 (Minn. 1967). In each the Debtor’s case and O’Brien, a debtor offered his prior homestead and established a brand new homestead in a second property he already owned. In each circumstances, debtors didn’t use sale proceeds from a previous homestead to buy or enhance a brand new homestead. Id. at 361. The Minnesota Supreme Courtroom acknowledged exempting sale proceeds with out requiring them for use for a brand new homestead would possibly subvert the legislative intent of Minn. Stat. § 510.07. Id. at 360-61; see additionally Donaldson v. Lamprey, 11 N.W. 119, 121 (Minn. 1881). However finally, the O’Brien courtroom discovered for no prohibition on concurrent or “double” exemptions within the textual content of Minn. Stat. §§ 510.01 or 510.07. Id., at 361. Regardless of the Courtroom’s categorical considerations in Donaldson v. Lamprey and once more in O’Brien v. Johnson, the Minnesota legislature has not amended the homestead statutes. Evaluate Minn. Stat. §§ 510.01–510.09 (2022) with 1905 Minn. Legal guidelines ch. 66.2 Subsequently, to the extent the Movement is based upon a authorized idea that concurrent exemptions underneath Minn. Stat. §§ 510.01 and 510.07 are prohibited by Minnesota legislation, the Movement is denied.
IT IS ORDERED, the Movement is denied partially: there is no such thing as a prohibition in opposition to the usage of concurrent exemptions underneath Minn. Stat. §§ 510.01 and 510.07 underneath Minnesota legislation. The Courtroom will difficulty a separate order to set the difficulty of abandonment on for evidentiary listening to. United States Chapter Choose Kesha L. Tanabe. January 6, 2023.
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