In their case summary authored for the Insolvency Law Committee’s e-Bulletin, Asa Hami and Jessica Vogel provided an update and analysis of Caldwell v. Nelson. The case involved the Bankruptcy Appellate Panel (BAP)’s ruling that Bankruptcy Code Section 522(p)(1)’s limitation on the amount a debtor could claim as a homestead exemption did not apply based on the applicable Nevada State exemption statutes, even though the debtor only obtained legal title to the subject property within the pre-petition period.
Caldwell is one of several recent decisions in which the BAP ruled in favor of protecting a debtor’s interest in a claimed homestead exemption. In their article, Mr. Hami and Ms. Vogel assert that these decisions signal the panel’s willingness to delve deeply into state exemption laws to identify legitimate statutory bases to enable debtors to utilize the homestead exemption.
As the BAP seems to be displaying more interest in policing the exemption disallowance process, Mr. Hami and Ms. Vogel note that it would be wise for Chapter 7 trustees within the Ninth Circuit to thoroughly analyze applicable homestead exemption statutes and laws before they engage in costly litigation.