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Bankruptcy Cases in the News: 11 USC § 522: The Residence Exemption

Bankruptcy Cases in the News

11 USC § 522: Residence Exemption

    This past August has had a bumper crop of interesting cases. In re Demeter, Case no.: 12-44593 local Bankruptcy Court Judge, (Easter District of Michigan) Thomas J. Tucker, decided a very interesting and helpful case to individual debtors. In this case, he was called upon to decide because of a trustee’s objection to the debtor’s exemptions whether a second home could qualify as a residence under the federal exemption, giving this debtor couple, up to $53,250.00 in exempt property or whether the exemption could only be applied to a so-called “primary” residence. Although, this other home was in foreclosure and had no equity, whatsoever.

 

In the end, Judge Tucker over ruled the trustee’s objection because the statute did not have a requirement that the residence exemption had to apply to a “primary” residence. In the blog which follows, we will look at some of the rules of statutory construction, employed by Judge Tucker. For our purposes here it is sufficient to say that Judge Tucker found that the debtors did have a significant connection with both houses, used both year round and never rented out. In addition, he reasoned that because 11 USC § 522 (d)(1)(d) did not use the word “primary” that he would not read it into the statute, as the statute only spoke of “real property…that the debtor uses as a residence…”

 

Also, in reaching his decision the Judge noted that his construction of the statute was also consistent with major purposes of the Bankruptcy Court. In doing so, the Court noted:

 

    “Under the Bankruptcy Code, there is an overriding federal interest in providing Debtors with “a fresh start.” See, e.g., In re W.R. Grace & Co., No. 11-199, 2012 WL 2130991, at *72 (D. Del. June 11, 2012)(listing a “fresh start” for a debtor as one of the important countervailing federal interests that could override state contract law); In re Buckley, 404 B.R. 877, 887 (Bankr. S.D. Ohio 2009)(citations and internal quotation marks omitted)(stating that “the overriding goal of the Bankruptcy Code [is] to provide a “fresh start” for the debtor”); In re Spears, 308 B.R. 793, 825 (Bankr. W.D. Mich. 2004) rev’d on other grounds, 313 B.R. 212 (W.D. Mich. 2004)(“Providing an individual debtor with a “fresh start” is a fundamental objective of the Bankruptcy Code.”) By providing debtors with the right to exempt certain property from the claims of creditors so that debtors have basic necessities to begin again, the exemption scheme under § 522 (d) is crucial to, and an integral part of a debtor’s “fresh start.” Schwab v. Reilly, 130 S. Ct. 2652, 2667 (2010)(“We agree that ‘exemption in bankruptcy cases are part and parcel of the fundamental bankruptcy concept of a “fresh start.”); Spears, 308 B.R. at 825 (“Congress enacted the exemption scheme set forth in Section 522 in order to provide an individual debtor with the fresh start it contemplated.”); 4 Collier on Bankruptcy ¶522.01[5], at 522-14 (Alan N. Resnick & Henry J. Sommer, eds., 16th ed. 2012) (“A fundamental component of an individual debtor’s fresh start in bankruptcy is the debtor’s ability to set aside certain property as exempt form the claims of creditors.”).

 

This determination is therefore good news for debtors looking to get their fresh start and retain as much property as is provided by the federal exemption. As Judge Tucker stated in Demeter: “Thus, §522(d)(1) permits a debtor to exempt a residence that is not the principal residence. And this interpretation is consistent with the requirement that bankruptcy courts must construe exemption liberally in favor of the debtor.”

 

If you have any questions about bankruptcy law or exemption planning please feel free to call bankruptcy attorney Guy Vining of the Vining Law Group. All initial telephone conference and office meetings are free of charge.


[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

About the Vining Law Group, P.L.C.


Guy Vining is the principal of Vining Law Group, PLC, which is engaged in the general practice of law in the state of Michigan. The goal of this firm is to provide you with quality legal service at a reasonable price, including consulting, planning and litigation when required. As the owner, Guy Vining is able to give each matter entrusted to him the personal attention it deserves. Unlike larger firms that often assign your case to a junior associate, with whom you have never met, Mr. Vining is personally responsible for all aspects of your case. Mr. Vining will answer any of your questions at the initial office conference, and it is he who will perform all necessary legal research, prepare all pleadings, draft all documents, and make all court appearances on your behalf. As a personal service firm, Mr. Vining’s office will keep you informed of the progress of your case on a regular basis. You will receive copies of all correspondence generated in the course of Mr. Vining’s work on your legal matter. Telephone messages will be promptly returned.



Mr. Vining believes that the attorney-client relationship must be one of mutual trust, respect, realistic goal setting, good communication, and zealous representation within ethical confines. The goal is provide the highest quality service to you, your family and friends. This principle works as most of Mr. Vining’s work is received from other attorneys who respect his craft or from former satisfied clients.