Exemption Protection: New Victory for Debtors
Our own Chris Keach prosecuted and briefed the case of Rockwell v. Hull last month, earning a victory for debtors by protecting exemptions in a simple and clear way.
The First Circuit has ruled that the complete snapshot rule governs the effective date of exemptions in the case.
A summary of the facts are as follows:
Rockwell filed Chapter 13 and validly claimed a $47,500 homestead exemption for his home.
During the course of the case, Rockwell sold his home at which time he reinvested a portion of those proceeds in a friend’s residence, where he thereafter lived.
Rockwell converted his case to Chapter 7.
The Chapter 7 Trustee, Hull, then asserted that Rockwell’s homestead exemption was lost as to the unspent exemption funds, because he did not reinvest all of the proceeds in a new residence within 6 months, as required by state statute.
Hull described Maine’s homestead exemption as a “vanishing exemption”.
The Bankruptcy Court and District Courts disagreed with Hull. They held that exemptions are determined at the time of filing of the bankruptcy case. In this instance, it was was when the Chapter 13 case was filed, not later, when the case was converted to Chapter 7. The First Circuit completely agreed, and went further by ruling that the ‘complete snapshot rule’ was the only interpretation of exemptions that were permitted by the Bankruptcy Code.
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Case is Rockwell v. Hull (1st Cir. 7/30/20), Case No. 19-2074
