Mrs. Johnson claimed that Chase breached a home equity loan agreement because the loan was for more than 80% of the value of the home in violation of the Texas Constitution. She argued that Chase should forfeit all principal and interest paid and pay her attorney’s fees because of the violation. She also brought a quiet title action seeking to void Chase’s lien under section 50(c) of the Texas Constitution.
Chase sought summary judgment dismissing the claims. The Court granted the motion on the breach of contract and attorney’s fee claims because they were barred by the 4-year statute of limitations. The Court denied the motion on the quiet title claim because there was some objective evidence that the property’s value was incorrect, which raised a genuine issue of material fact on whether the loan to value ratio was violated. The Court also determined that Chase could not rely on the safe harbor provision in the Texas Constitution because the value acknowledged by Mrs. Johnson was not the value in Chase’s valuation.
WL Cite: Johnson v. Chase (In re Johnson), Adv No. 18-01003, 2019 WL 1423090 (Bankr. W.D. Tex. 2019)
The central dispute, whether the creditor’s pre-existing judgment lien attached to the debtors’ homestead, was primarily decided by two well-established Texas legal principles. First, a creditor’s pre-existing judgment lien cannot attach to a judgment debtor’s subsequently acquired property that is contemporaneously designated as a homestead. Second, a valid homestead designation does not require immediate physical possession of the property. Texas courts recognize that there is usually an “unavoidable interval” between the acquisition and actual physical possession of a property and have therefore firmly rejected a rule that would result in a race between the sheriff and the property owner.
WL cite: 573 B.R. 205 (Bankr. W.D. Tex. 2017)
In this case, the chapter 7 trustee and a creditor argued that the Debtors’ homestead exemption should be reduced pursuant to 11 U.S.C. § 522(o) because the Debtors used nonexempt property to purchase their home with the intent to hinder, delay or defraud creditors. The Court found that the Debtors did not purchase the homestead with such intent, but found that they made cosmetic repairs to the homestead shortly before filing bankruptcy with the intent to hinder, delay or defraud creditors. The Court therefore reduced the value of the Debtors’ equity in the homestead in accordance with § 522 by the amount of the cosmetic repairs. The Court then imposed an equitable lien on the homestead to secure the estate’s interest in the Debtors’ equity. The Court also held that the snapshot rule prevented the Trustee from keeping the case open until the Debtors’ equity in their homestead appreciated above the equity cap set by 11 U.S.C. § 522(p).
WL Cite: 552 B.R. 158 (Bankr. W.D. Tex. 2016)
The Debtor and her husband executed a contract to sell their home before filing a case under chapter 7 of the Bankruptcy Code. In her bankruptcy schedules, the Debtor claimed the home as exempt homestead property. After filing bankruptcy, the Debtor closed on the sale of the home and received proceeds from the sale. The trustee argued the proceeds were not exempt because she did not reinvest them into a new homestead within six months of the sale. The Court rejected the trustee’s contention and held that the Debtor was entitled to exempt the proceeds of the sale because the Debtor owned the property outright when she filed for chapter 7 relief. The Court distinguished the facts of this case from the facts in In re Zibman, 268 F.3d 298 (5th Cir. 2001) because the debtor in that case had sold the homestead prior to bankruptcy, and so the debtor held proceeds and not property on the date the bankruptcy was filed. The Court noted that the Texas homestead exemption is not limited in time, and distinguished the case from the district court decision in Frost v. Viegelahn (In re Frost), No. 5:11–cv–719, Dkt. No. 11 (W.D.Tex. July 9, 2012), on the grounds that Frost was a chapter 13 case. But see Frost, 744 F.3d 384 (5th Cir. 2014) (holding that proceeds from the post-bankruptcy sale of an exempted homestead lost their exempt status if they were not reinvested within six months; and the language used by the Fifth Circuit suggests that the result would be the same in a chapter 7 case).
WL Cite: In re D’Avila, 498 B.R. 150 (Bankr. W.D. Tex. 2013)
The chapter 7 trustee objected to the Debtors’ Texas homestead exemption in property where the Debtors resided along with Debtor Ms. Brunson’s father. Ms. Brunson also held a fee simple future interest in the property and her father retained a life estate. The Court held that although the Debtors currently resided in the house and Ms. Brunson retained a future interest in the house, the Debtors had no present, exclusive possessory interest in the property and their future reversionary interest was not sufficient under Texas homestead law to allow them to claim an exemption in the property. The trustee’s objection was granted.
WL Cite: In re Brunson, 498 B.R. 160 (Bankr. W.D. Tex. 2013).
The Debtors claimed their homestead as exempt under Texas law with a value of $0 as the property was subject to liens totaling $341,582 with an IRS lien of $330,000. No objections were raised on the Debtors’ exemptions. The Debtors then converted to a chapter 7 case and reached a settlement with the IRS that reduced the claim to $140,000. The Debtors filed amended schedules in the converted chapter 7 case, changing the value of the homestead exemption from $0 to $230,362. The chapter 7 trustee objected and argued that the Debtors had nothing to exempt because there was no equity in the home. The Court disagreed, holding that the Texas homestead exemption is not based on value; it is based on size, location and use and thus, even if the Debtors had no equity to exempt, they would still have a residence that was exempt under Texas homestead law.
In re Parsons, 530 B.R. 411 (Bankr. W.D. Tex. 2014).
The Debtor owned options that allowed him to buy three tracts of property during the six months following his mother’s death. For many years, the Debtor had leased the same tracts of land from his mother. In his bankruptcy schedules, the Debtor exempted both the option and the leases as homestead property. The Trustee objected to the Debtor’s exemption of the options because they were future interests, but did not object to the exemption of the leases. The Court found that the options were not severable from the leases and so, since the leases were exempt, the options were validly exempted.
WL Cite: Unavailable