Case Summary:
Debtors George and Ellen Conway claimed a $150,000 exemption in proceeds from the prepetition sale of their homestead. Chapter 7 Trustee Brian Hart objected to their exemption. Creditor Greenwich Business Capital had obtained a default judgment against George Conway and his entity and was seeking to attach the judgment to Debtors’ homestead. Trying to avoid liability and on advice of counsel, George Conway quit claimed his interest in the homestead to Ellen Conway. Greenwich filed a UCC financing statement with the Dane County Register of Deeds. Ellen tried to sell the property to a third party, but the UCC was identified as a potential cloud on title. The title agency required the Debtors to enter into a secured indemnity agreement which allowed the title company to keep the sale proceeds in trust until the UCC was extinguished or otherwise disposed of. Debtors filed their petition while the title company was in possession of the proceeds. The Court denied the homestead exemption for George but allowed Ellen to claim the exemption. George willfully relinquished his ownership to Ellen well in advance of the petition and thus was not an "owner" of the homestead and did not have a legal or equitable interest in the proceeds on the petition date. With respect to Ellen, even though the secured indemnity agreement gave legal ownership and possession of the proceeds to the title company, the intent of the agreement was not to permanently deprive Ellen of the proceeds, and she retained a contingent interest. Thus, she could claim the exemption.

Statute/Rule References:
11 U.S.C. § 105 -- Power of court
11 U.S.C. § 522 -- Exemptions
Fed. R. Bankr. P. 4003(c) -- Burden of proof
Wis. Stat. § 706.01(4) -- Meaning of “conveyance”
Wis. Stat. § 766.63 -- Mixed property
Wis. Stat. § 815.20 -- Homestead exemption

Key Terms:
Exemptions
Homestead Exemption