In re: Kathy Ellen Richards

RECOMMENDED FOR PUBLICATION
File Name: 22b0004p.06
BANKRUPTCY APPELLATE PANEL
OF THE SIXTH CIRCUIT
┐
IN RE: KATHY ELLEN RICHARDS, │
> No. 22-8002
Debtor. │
┘
Appeal from the United States Bankruptcy Court
for the Western District of Kentucky at Owensboro.
No. 4:21-bk-40438—Charles R. Merrill, Judge.
Argued: May 17, 2022
Decided and Filed: August 25, 2022
Before: BAUKNIGHT, DALES, and GUSTAFSON, Bankruptcy Appellate Panel Judges.
_________________
COUNSEL
ARGUED: Russ Wilkey, WILKEY & WILSON, P.S.C., Owensboro, Kentucky, for Appellant.
Mark Little, THE LAW OFFICES OF MARK LITTLE, Madisonville, Kentucky, for Appellee.
ON BRIEF: Russ Wilkey, WILKEY & WILSON, P.S.C., Owensboro, Kentucky, for
Appellant. Mark Little, THE LAW OFFICES OF MARK LITTLE, Madisonville, Kentucky, for
Appellee.
_________________
OPINION
_________________
JOHN P. GUSTAFSON, Bankruptcy Appellate Panel Judge. This appeal concerns the
“uses as a residence” requirement in 11 U.S.C. § 522(d)(1).1 Kathy Ellen Richards (“Debtor”)
appeals from the bankruptcy court’s order sustaining an objection to a claimed exemption in
$23,298.78 that was held in escrow when Debtor filed her bankruptcy petition. Debtor claimed
1Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C.
§§ 101–1532.
No. 22-8002 In re Richards Page 2
the funds as exempt pursuant to § 522(d)(1). The Trustee, Mark Little (“Trustee”), objected
because although the funds are directly traceable proceeds of Debtor’s prepetition sale of her
residence, the proceeds were not being “used as a residence” at the time the petition was filed. 2
The bankruptcy court sustained Trustee’s objection, holding that the plain language of
§ 522(d)(1) does not apply to proceeds from a prepetition sale of a residence. The Panel
AFFIRMS.
ISSUE ON APPEAL
The Debtor’s sole issue on appeal is “[w]hether or not the bankruptcy court erred when it
held that 11 U.S.C. § 522(d)(1) does not permit the exemption of the proceeds from the pre-
petition sale of the Debtor’s homestead.” (Appellant’s Statement of Issues on Appeal, Bankr.
Case No. 21-40438, ECF No. 41.)
Trustee raises a jurisdictional issue, asserting that this appeal is moot because Debtor
amended her Schedule C to add a claim that the proceeds from the sale are exempt under the
“wildcard” exemption found in § 522(d)(5). Accordingly, Trustee argues that a ruling on
whether the exemption under § 522(d)(1) is available would be an advisory opinion.
JURISDICTION AND STANDARD OF REVIEW
Under 28 U.S.C. § 158(a)(1), the Panel has jurisdiction to hear appeals “from final
judgments, orders, and decrees” issued by a bankruptcy court. “Orders in bankruptcy cases
qualify as ‘final’ when they definitively dispose of discrete disputes within the overarching
bankruptcy case.” Ritzen Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 586 (2020) (citing
Bullard v. Blue Hills Bank, 575 U.S. 496, 501, 135 S. Ct. 1686, 1691 (2015)). “An order
sustaining a trustee’s objection to debtor’s claim of exemptions is a final, appealable order.” In
re Zingale, 451 B.R. 412, 414 (B.A.P. 6th Cir. 2011) (determining that the order “ends the
litigation on the merits and leaves nothing for the court to do but execute the judgment” (citing
Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S. Ct. 1494, 1497 (1989))), aff’d
2Although this Panel will not refer to “homestead” and “residence” as interchangeable terms under
§ 522(d)(1), any quoted material that references the term “homestead” in place of the term “residence” set forth in
§ 522(d)(1) has not been altered or displaced.
No. 22-8002 In re Richards Page 3
on other grounds, 693 F.3d 704 (6th Cir. 2012); see also In re Aubiel, 534 B.R. 300, 301–02
(B.A.P. 6th Cir. 2015) (holding that an order sustaining or overruling an objection to a debtor’s
claim of exemption is a final order); Menninger v. Schramm (In re Schramm), 431 B.R. 397, 399
(B.A.P. 6th Cir. 2010) (same); Wicheff v. Baumgart (In re Wicheff), 215 B.R. 839, 840 (B.A.P.
6th Cir. 1998) (same).
“A debtor’s entitlement to a bankruptcy exemption most often involves a legal question
and is reviewed de novo, except where facts are in dispute.” Aubiel, 534 B.R. at 302 (citation
omitted). This appeal, however, does not involve any factual dispute. “De novo review requires
the Bankruptcy Appellate Panel to interpret statutes independently of the determination of the
bankruptcy court.” I.R.S. v. Juntoff (In re Juntoff), 636 B.R. 868, 872 (B.A.P. 6th Cir. 2022).
In his brief, Trustee asserts that this appeal is moot because after the bankruptcy court
entered the order sustaining Trustee’s objection to Debtor’s exemption, Debtor amended her
exemptions by claiming the “wildcard” exemption in § 522(d)(5) to exempt $10,698.00 of the
proceeds. She then remitted the remaining $12,570.78 to the Trustee. Accordingly, Trustee
asserts there is not a live case and controversy. See In re Hake, 398 B.R. 892, 899 (B.A.P. 6th
Cir. 2008) (“This court determine[s] mootness ‘by examining whether an actual controversy
between the parties exists in light of intervening circumstances.’” (quoting Fleet Aerospace
Corp. v. Holderman, 848 F.2d 720, 723 (6th Cir. 1988))), aff’d, 348 F. App’x 80 (6th Cir. Aug.
14, 2009).
At the outset, the Panel must address Trustee’s argument that this appeal is moot because
mootness in the Article III sense implicates a federal court’s jurisdiction. Because we conclude
that a live controversy continues to exist and we can grant effective relief based on the record
before us, we reject Trustee’s suggestion of mootness, constitutional or otherwise.
As Trustee acknowledged during oral argument, he is holding a substantial portion of the
proceeds from the sale of Debtor’s former residence and has postponed filing his final report
pending the Panel’s decision on this appeal. As a result, the Panel could, if it were so inclined,
grant Debtor effective relief at least with respect to the proceeds Trustee is holding. Mission
Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652, 1660 (2019) (finding that an
No. 22-8002 In re Richards Page 4
appellate court may dismiss a case for mootness only if “it is impossible for a court to grant any
effectual relief whatever” to the appellant, assuming it prevails).
Trustee’s argument that Debtor waived her right to challenge the bankruptcy court’s
decision by amending Schedule C to claim the “wildcard” exemption under § 522(d)(5) presents
a closer question, but ultimately lacks merit under the circumstances of this case. First, Debtor’s
vigorous prosecution of the appeal belies any notion that she intended to waive her claim of
exemption under § 522(d)(1). Second, the amended exemption document (entered on the
bankruptcy court docket at ECF No. 34) could be viewed as an attempt to supplement, not
supplant, Debtor’s exemption claims. Debtor did not restate all her claimed exemptions using
the Official Form; instead, she filed an attorney-prepared document indicating that she “omitted”
her claim under § 522(d)(5) from the original iteration of Schedule C.3
Debtor’s post-decision amendment to Schedule C is not so inconsistent with her
exemption claim under § 522(d)(1) as to warrant a finding of waiver under the circumstances.
The better reading of the record as a whole is that, in filing the amendment, Debtor endeavored
to comply with the bankruptcy court’s order pending appeal, as her counsel asserted during the
oral argument before the Panel. The Supreme Court recently stated that compliance with a
bankruptcy court’s decision pending appeal does not moot the case if it remains possible on
appeal, as it does here, to “undo the effects of compliance.” Mission Prod. Holdings, Inc., 139 S.
Ct. at 1660–61 (quoting 13B Wright, A. Miller & E. Cooper, Federal Practice and Procedure
§ 3533.2.2, p. 852 (3d ed. 2008)). As the Panel views the record, the relief Debtor requests
3Indeed, Debtor’s “Amendment to Schedules” provides the following:
Comes now the debtor and states through error and inadvertence the following was
omitted from her bankruptcy petition:
AMENDED SCHEDULE C:
proceeds of sale of house put into escrow account held by Wilkey & Wilson PSC, value
$23,268.78, exempt under 11 U.S.C. § 522(d)(5) for $10,698.00
(Am. Schedules C, Bankr. Case No. 21-40438, ECF No. 34.)
No. 22-8002 In re Richards Page 5
would not be merely advisory but would, if granted, require Trustee to disburse the remaining
proceeds to Debtor. Accordingly, the appeal is not moot.4
FACTS
Turning to the merits of the appeal, the underlying facts are not in dispute.
Debtor sold her home six days before filing a chapter 7 bankruptcy petition. The sale of
the home netted $36,793.60, which Debtor placed into escrow with the law firm Wilkey &
Wilson, PSC. Wilkey & Wilson, PSC represents Debtor in her bankruptcy proceeding. Debtor
disclosed the sale of her residence on her Statement of Financial Affairs and provided a copy of
the escrow ledger to Trustee.
Debtor claimed the federal exemptions pursuant to § 522(b)(2). She asserted that the
proceeds from the sale of her home are exempt under § 522(d)(1) as proceeds from the sale of
Debtor’s residence. The chapter 7 Trustee filed an objection to the claimed exemption.
The parties’ initial briefing before the bankruptcy court reflected an agreement as to the
facts, but a dispute as to whether Debtor’s federal exemption claim should be allowed.
Following briefing, the bankruptcy court held a hearing and required additional briefing on the
legal issues. After briefing was complete, the bankruptcy court entered an order sustaining
Trustee’s objection to the claimed exemption, finding:
[T]here is no language in 11 U.S.C. § 522(d)(1) that would permit the exemption
of the proceeds from the prepetition sale of the Debtor’s homestead. In relevant
part, § 522(d)(1) provides for an exemption in “the debtor’s aggregate interest, not
4During oral argument, the Panel asked Trustee to address the distinction between one of the alternatives
for obtaining appellate review in a bankruptcy proceeding identified by the Supreme Court in Bullard v. Blue Hills
Bank, 575 U.S. 496, 507, 135 S. Ct. 1686, 1695 (2015)—a debtor proposing an amended plan under protest and then
appealing its confirmation—and a debtor amending Schedule C to claim the “wildcard” exemption after an objection
to a separate exemption has been sustained. Courts have held that this alternative identified by the Supreme Court
(after denial of confirmation, proposing an amended plan and then appealing its confirmation) does not prevent a
debtor from seeking appellate review partly because the reviewing court can provide a debtor with effective relief.
See, e.g., Zahn v. Fink (In re Zahn), 526 F.3d 1140, 1142–44 (8th Cir. 2008) (recognizing that a debtor who
proposes and objects to his own plan may be an aggrieved party with standing to appeal confirmation of such plan);
Giesbrecht v. Fitzgerald (In re Giesbrecht), 429 B.R. 682, 689 (B.A.P. 9th Cir. 2010) (holding debtor had standing
to appeal from an order confirming her own plan). Additionally, during oral argument, this Panel asked Trustee
whether his argument distinguished between waiver and mootness. Trustee’s response was that the focus of his
argument was on mootness. For the reasons stated above, the appeal is not moot.
No. 22-8002 In re Richards Page 6
to exceed $25,150 in value, in real property or personal property that the debtor or
a dependent of the debtor uses as a residence.” – The language of the Code is
clear and unambiguous in this instance, vesting no exemption power in the
proceeds arising out of the prepetition sale of a debtor’s homestead. See In re
Healy, 100 B.R. 443, 445 (Bankr. W.D. Wis. 1989) (holding that “the exemption
laws of many states, including Wisconsin, exempt proceeds from the sale of a
homestead. There is, however, no equivalent language in section 522(d)(1), and
none can be inferred.”); In re Lawrence, 469 B.R. 140, 142 (Bankr. D. Mass.
2012) (the court found that for the homestead exemption to apply, “usage [of a
residence] must transcend the petition date or at least exist as of the petition
date”); In re Boward, 334 B.R. 350, 352 (Bankr. D. Mass. 2005) (“The statutory
language is free of ambiguity and plain in its meaning: the debtor must be residing
in the property at the time of the commencement of the bankruptcy case”).
In re Richards, No. 21-40438-CRM, 2022 WL 99503, at *2 (Bankr. W.D. Ky. Jan. 10, 2022)
(alteration in original).
DISCUSSION
Generally, courts construe exemptions liberally in favor of debtors. In re Demeter,
478 B.R. 281, 286 (Bankr. E.D. Mich. 2012). A party objecting to a claimed exemption bears
the burden of proving, by a preponderance of the evidence, that “the exemptions are not properly
claimed.” See Fed. R. Bankr. P. 4003(c). Unless a state has opted out, the Bankruptcy Code
allows a debtor to choose between either the federal exemptions provided in the Bankruptcy
Code or exemptions allowed under state law, but not both. See Raynard v. Rogers (In re
Raynard), 354 B.R. 834, 838 (B.A.P. 6th Cir. 2006) (“In those states . . . that have not opted out
of the federal bankruptcy exemptions, debtors are free to choose between two sets of exemptions
provided by the Bankruptcy Code[.]”). Here, Debtor chose the federal exemptions. “Unlike
some state homestead exemptions, section 522(d)(1) does not expressly exempt proceeds from
the prepetition sale of homestead property.” 4 Collier on Bankruptcy ¶ 522.09[1] (16th ed.
2022); accord In re Healy, 100 B.R. at 445.
No. 22-8002 In re Richards Page 7
Section 522(d)(1) provided,5 in relevant part, an exemption for:
The debtor’s aggregate interest, not to exceed $25,150 in value, in real property or
personal property that the debtor or a dependent of the debtor uses as a residence,
in a cooperative that owns property that the debtor or a dependent of the debtor
uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.
11 U.S.C. § 522(d)(1) (emphasis added). Debtor claimed this exemption for the proceeds from
the prepetition sale of her residence. Trustee objected, asserting that the exemption may only be
claimed in property a debtor or dependent is using as a residence. The bankruptcy court agreed,
holding that money sitting in an account is not being used as a residence.
The Supreme Court has adopted the “plain meaning” approach as the standard for
statutory construction. See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240–42, 109
S. Ct. 1026, 1030–31 (1989) (“[A]s long as the statutory scheme is coherent and consistent, there
generally is no need for a court to inquire beyond the plain language of the statute.”); Caminetti
v. United States, 242 U.S. 470, 485, 37 S. Ct. 192, 194 (1917) (“It is elementary that the meaning
of a statute must, in the first instance, be sought in the language in which the act is framed, and if
that is plain . . . the sole function of the courts is to enforce it according to its terms.”).
Debtor attempts to overcome the plain language of § 522(d)(1) by urging the Panel to
look at state law.6 Debtor asserts that “the federal bankruptcy code does not define ‘homestead’
or ‘proceeds’, but rather relies on the law of the state where the debtor lives.” (Appellant’s Br. at
25.) Citing Kentucky Revised Statute § 427.170, Debtor argues that “Kentucky courts . . . have
found that exempt property converted to another form maintain that same exempt status,
provided that the proceeds are traceable.” (Appellant’s Br. at 20.) Debtor cites cases decided
under Kentucky’s exemption statute. See, e.g., United States v. Robinson, No. 3:13-CV-27-
GFVT, 2016 WL 3041879, at *3 (E.D. Ky. May 26, 2016) (addressing proceeds from liquidation
of a 401(k) account and citing cases for the general proposition that funds traceable to exempt
5The bankruptcy court entered the order sustaining Trustee’s objection when the dollar amount reflected in
§ 522(d)(1) was $25,150. However, § 522(d)(1) was adjusted to $27,900 effective April 1, 2022.
6In asking the Panel to bypass the statutory text and look at applicable state law to determine what
constitutes a “residence” under § 522(d)(1), Debtor cites, among other cases, Erie R. Co. v. Tompkins, 304 U.S. 64,
58 S. Ct. 817 (1938), and Butner v. United States, 440 U.S. 48, 99 S. Ct. 914 (1979). (Appellant’s Br. at 12.) For the
reasons below, we find no reason for departing from the plain meaning of the statute.
No. 22-8002 In re Richards Page 8
funds retain their status). Debtor also argues that the Kentucky Court of Appeals has held that
when a person is entitled to a homestead, the fact that the property is indivisible and must be
converted into cash does not destroy the right to the homestead exemption. (Appellant Br. at 25
(citing John Staun & Co. v. Proctor, 153 S.W. 196 (Ky. 1913); Roberts v. Adams, 96 S.W. 554(Ky. 1906)).)
This Panel must dismiss Debtor’s argument under Kentucky law. Debtor opted to use the
federal exemptions. Section 522(d), not Kentucky law, sets forth what property may be claimed
as exempt in this case. Thus, Kentucky law is inapplicable under these facts.
For the reasons discussed below, the Panel rejects Debtor’s argument that the exemption
under § 522(d)(1) can attach to proceeds from a prepetition residential sale.
In the present case, Trustee argues, and the bankruptcy court held, that Debtor was not
entitled to claim an exemption under § 522(d)(1) because at the time the petition was filed, she
was not using the property as a residence. A “debtor may claim only those exemptions available
at the time of the bankruptcy petition filing[.]” Holley v. Corcoran (In re Holley), 661 F. App’x
391, 395 (6th Cir. Oct. 25, 2016) (citing In re Wengerd, 453 B.R. 243, 250 (B.A.P. 6th Cir.
2011) (citing White v. Stump, 266 U.S. 310, 313, 45 S. Ct. 103, 104 (1924))). Thus, the proceeds
could not “retain” exempt status because, at the time of filing, there was no property being used
as a residence to claim as exempt. Instead, there were only funds held in escrow. Debtor
acknowledges that none of the case law cited holds that the proceeds of the pre-bankruptcy sale
of a residence can be claimed as exempt under the federal statute.
In addition to the argument that state law would allow an exemption under § 522(d)(1) to
apply to traceable proceeds, Debtor also asserts that the bankruptcy court focused “too narrowly”
on the “use as a residence” requirement of the statute. Instead, Debtor asserts that the phrase
“aggregate interest” intends to “encompass more than a physical structure.” (Appellant’s Br. at
20.) Debtor refers to the purpose of the Bankruptcy Code to give a debtor a fresh start and the
directive to construe exemptions liberally in favor of the debtor as further support for the
argument that the proceeds of a residence sold prepetition can be held exempt under the federal
exemption provision.
No. 22-8002 In re Richards Page 9
The Panel does not find Debtor’s arguments persuasive. As Trustee argued and the
bankruptcy court held, the statutory language is plain. Section 522(d)(1) applies to property that
the debtor “uses” as a “residence.” The debtor must be residing in the property at the time of the
commencement of the bankruptcy case to claim this exemption pursuant to § 522(d)(1).7 In this
case, Debtor did not “use” the property “as a residence” as § 522(d)(1) requires.
While the Bankruptcy Code does not define “residence,” the term is not
ambiguous. According to Black’s Law Dictionary a residence is “the place where
one actually lives,” and elaborates that a person thus may have “more than one
residence at a time.”
In re Lawrence, 469 B.R. at 142 (citation omitted). We “must presume that [the] legislature says
in a statute what it means and means in a statute what it says there.” Dodd v. United States,
545 U.S. 353, 357, 125 S. Ct. 2478, 2482 (2005) (alteration in original) (citing Conn. Nat’l Bank
v. Germain, 503 U.S. 249, 253–54, 112 S. Ct. 1146, 1149 (1992)).
This Panel agrees with the result in Healy, which directly addressed this issue and held
§ 522(d)(1) does not provide for an exemption in the proceeds of the sale of a residence.
100 B.R. at 445; accord Hoffman v. Cent. Pa. Nat’l Bank (In re Hoffman), 96 B.R. 46, 49
(Bankr. W.D. Pa. 1988) (“The debtor is not trying to recover the house. Nor does he allege that
the property (money from the sale) is used as a residence. Because neither the debtor nor a
dependent use the proceeds as a residence, the homestead exemption is not available.”); 9A Am.
Jur. 2d Bankruptcy § 1429, Westlaw (database updated August 2022) (“The federal homestead
7It should be noted that the “plain meaning” interpretation of this statute does not necessarily favor either
debtors or creditors. For example, there is a split of authority as to whether a state law definition of “homestead”
should be read into § 522(d)(1) to limit the exemption—disallowing an exemption in property that is used as a
residence, but which is not used as debtor’s principal residence. Compare In re Demeter, 478 B.R. at 286–88
(rejecting the chapter 7 trustee’s argument to limit the word “residence” under § 522(d)(1) to what is a “homestead”
under state law), with In re Stoner, 487 B.R. 410, 417–21 (Bankr. D.N.J. 2013) (sustaining the chapter 7 trustee’s
objection after looking at state law interpretations of the term “homestead” to determine the meaning of “residence”
under § 522(d)(1)). That issue is not before this Panel, but we note, as the Lawrence court did, that Congress used
the term “debtor’s primary residence” in § 707(b)(2)(A)(iii)(II). In re Lawrence, 469 B.R. at 142 n.2. In addition,
the term “debtor’s principal residence” is a defined term in the Bankruptcy Code, § 101(13A), that is used to limit
mortgage modifications under § 1322(b)–(c), and in a homestead limitation under § 522(p). Id. at 141–42. Finally,
Congress used the term “principal residence of the debtor” in § 524(j)(1) and § 1190(3). Congress did not use any
of those more limiting “residence” terms in § 522(d)(1).
No. 22-8002 In re Richards Page 10
exemption does not provide an exemption for the proceeds of the sale of a homestead.” (footnote
omitted)).8
The broader case law also supports denial of the claimed exemption. Several courts have
held that one of the requirements for eligibility under § 522(d)(1) is that the debtor presently
“uses” the property as a residence. In re Tankersley, 575 B.R. 848, 861–65 (Bankr. E.D. Ark.
2017); In re Demeter, 478 B.R. at 286–88; In re Lawrence, 469 B.R. at 142 (“The Code speaks
in the present tense which indicates that usage must transcend the petition date or at least exist as
of the petition date. Thus, where a debtor had never used a residence prior to filing, bankruptcy
courts have held that the residence may not be exempted under § 522(d).”); In re Gandy, 327
B.R. 807, 809–10 (Bankr. S.D. Tex. 2005); cf. Lubin v. Mason (In re Mason), 607 B.R. 360,
365–66 (Bankr. N.D. Ga. 2019) (analyzing identical language under Georgia’s exemption
statute); In re Cole, 185 B.R. 95, 97–98 (Bankr. D. Me. 1995) (analyzing identical language
under Maine’s exemption statute). This additional case law supports the bankruptcy court’s
order sustaining Trustee’s objection and the denial of the claimed exemption.
Looking at the cases where the “residence” requirement has been in issue, the grounds for
equitably expanding9 what constitutes a “residence” do not apply here. For example, courts have
held that when a debtor has used a property as a residence but is not residing there at the time of
filing, that in addition to a self-serving statement of intent to return, the debtor must also
demonstrate a meaningful ability to occupy the property imminently or within a reasonable time.
See Sikirica v. Yanovich (In re Yanovich), 544 B.R. 306, 312 (Bankr. W.D. Pa. 2016) (quoting In
re Bennett, 192 B.R. 584, 588 (Bankr. D. Me. 1996)). Here, the property was sold prior to filing,
so Debtor has no meaningful ability to occupy the property in the future, and she presented no
evidence of either intent or ability to the trial court.
8Of course, when a residence is claimed as exempt under § 522(d)(1), a postpetition sale of the residence
and retention of the proceeds does not affect its exempt character under § 522(d)(1). In re Sparks, No. 09-30238-
H3-7, 2009 WL 2824868, at *2 (Bankr. S.D. Tex. Aug. 31, 2009).
9We are not expressing any view on the cited case law interpreting the meaning of “residence” using
constructive occupancy concepts. Even if these equitable expansions of the residence exemption are applicable,
they are not applicable to the denial of Debtor’s § 522(d)(1) exemption based on the record in this case.
No. 22-8002 In re Richards Page 11
More directly applicable to this case is the discussion in Healy regarding how the use of
the proceeds might equate to “constructive occupancy.” 100 B.R. at 445. The Healy court stated
that “any claimed exemption in the proceeds must be denied when, as in this case, there is no
evidence that the proceeds were intended to be reinvested in a new residence which the Healys
planned to occupy.” Id. Again, if this type of constructive occupancy argument were to be
viable, it would fail when—as is the case here—no evidence was presented to the trial court
regarding reinvestment of the proceeds in a new residence that Debtor intended to occupy.
Further, Debtor’s argument runs afoul of the Supreme Court’s directive that “‘whatever
equitable powers remain in the bankruptcy courts must and can only be exercised within the
confines of’ the Bankruptcy Code.” Law v. Siegel, 571 U.S. 415, 421, 134 S. Ct. 1188, 1194–95
(2014) (quoting Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206, 108 S. Ct. 963, 969
(1988)). Specifically, the Supreme Court noted that Ҥ 522 does not give courts discretion to
grant or withhold exemptions based on whatever consideration they deem appropriate. Rather,
the statute exhaustively specifies the criteria that will render property exempt.” Id. at 423–24,
134 S. Ct. at 1196. Here, the Bankruptcy Code only grants an exemption in property the debtor
or a dependent “uses as a residence.” An expansion of that exemption to include sale proceeds is
for Congress, not the courts.
Finally, the use of equity to expand the scope of § 522(d)(1) is particularly inappropriate
where Congress has provided an alternative when that exemption is not available: § 522(d)(5).
Section 522(d)(5) enables certain debtors to exempt up to $13,950 in “any” property.
This enhanced exemption can be taken if and only if a debtor has “any unused amount of the
exemption provided under” § 522(d)(1). Accordingly, in striking this balance, Congress gave
certain debtors, such as non-homeowners, the opportunity to claim an increased exemption. See
Law, 571 U.S. at 424. When Congress has explicitly enumerated certain exceptions to a general
prohibition, additional exceptions are not to be implied. See id. (“The Code’s meticulous—not
to say mind-numbingly detailed—enumeration of exemptions and exceptions to those
exemptions confirms that courts are not authorized to create additional exceptions.”). Thus,
Congress’s decision to give certain debtors an enhanced exemption for any unused amount of the
No. 22-8002 In re Richards Page 12
residency exemption is another reason why we may not look to other law or use equitable powers
to expand § 522(d)(1) to include proceeds.
For these reasons, we conclude the language in § 522(d)(1) does not permit Debtor to
exempt the proceeds from the prepetition sale of her former residence.
CONCLUSION
Section 522 allows an exemption in real or personal property being used as a residence.
The funds held in escrow were not being used as a residence at the time the bankruptcy petition
was filed. Kentucky law allowing for an exemption in proceeds is not applicable because Debtor
chose the federal exemptions. Simply, this Panel cannot extend the exemption scheme beyond
what is provided for by the Bankruptcy Code. The bankruptcy court’s order sustaining the
Trustee’s objection is AFFIRMED.