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Limits on homestead exemptions
Contrary to the general effective date of S.
256, each of the following amendments, limiting the right
to claim large homestead exemptions, applies in all cases
filed on or after the enactment of S. 256.
• S. 256 § 308; reduction
of homestead value for fraudulent additions A new § 522(o)
reduces the value of a debtor’s homestead, for purposes
of a state homestead exemption, to the extent of any addition
to the value of the homestead on account of a disposition
of nonexempt property made by the debtor—made with intent
to hinder, delay, or defraud creditors—during the 10
years prior to the bankruptcy filing.
• S. 256 § 322; limitation
on new homestead additions; homestead cap Under a new §
522(p), any value in excess of $125,000— without regard
to the debtor’s intent—that is added to a homestead
during the 1215-days (about 3 years, 4 months) preceding the
bankruptcy filing may not be included in a state homestead
exemption unless it was transferred from another homestead
in the same state or the homestead is the principal residence
of a family farmer.
Under a new § 522(q), an absolute $125,000
homestead cap applies if either (a) the court determines that
the debtor has been convicted of a felony demonstrating that
the filing of the case was an abuse of the provision of the
Bankruptcy Code, or (b) the debtor owes a debt arising from
a violation of federal or state securities laws, fiduciary
fraud, racketeering, or crimes or intentional torts that caused
serious bodily injury or death “in the preceding 5 years.”
However, this limitation is inapplicable if the homestead
property is “reasonably necessary for the support of
the debtor and any dependent of the debtor.”
• S. 256 § 330; delay of
discharge to determine homestead limits
The discharge provisions of Chapters 7, 11, and 13 are all
amended to delay the grant of a discharge for a debtor who
is subject to a proceeding that might give rise to a limitation
of the homestead exemption under new § 522(q) (1), discussed
above.
In Chapter 7, a new ground for not granting
discharge is set out in § 727(a)(12), based on a finding
by the court that such a § 522(q) proceeding is pending.
In Chapter 11, a new § 1141(d)(5)(C) appears to require,
as a condition for discharge, that the court find no reason
to believe that such a proceeding is pending (the provision
is ambiguous because it is a long sentence fragment). In Chapter
13, new § 1328(h) clearly provides that the court may
not grant a discharge unless the court finds “no reasonable
cause to believe” that there is pending a proceeding
of the kind that would result in the limitation of an exemption
under § 522(q). All of these new provisions specify that
the hearing they allow or require is to be conducted “not
more than 10 days before the date of the entry of the order
granting discharge.” The intent of these provisions
apparently is to allow a discharge order to be entered only
if the court is able to find that no § 522(q) proceeding
is pending, with the impact of delaying discharge until the
conclusion of any such proceeding.
The heading of § 330 of S. 256—“Delay
of Discharge during Pendency of Certain Proceedings”—
confirms this understanding. |
