Case Summary:
During the Debtors’ marriage, the Debtor-wife received an interest in real property from her father. The Debtors later executed a mortgage note with a bank and pledged the real property as collateral. The Debtors made payments on the mortgage note with marital property funds. The Debtors filed for bankruptcy under Chapter 7, and each claimed an exemption in the real property under 11 U.S.C. § 522(d)(5). The Chapter 7 Trustee objected, claiming that the wife’s interest in the real property was individual property under Wisconsin law, and therefore, the husband could not claim any exemption in it. The Bankruptcy Court found that marital property was “mixed” with the wife’s individual property under Wis. Stat. § 766.63(1) because the principal payments the Debtors made on the mortgage note constituted marital property. However, because the marital property component could be traced, the real property was not reclassified to marital property. The Debtor-husband was entitled to claim an exemption in his undivided one-half interest in the amount of principal payments made on the mortgage note.

Statute/Rule References:
11 U.S.C. § 522(d) -- Exemptions - Federal
Wis. Stat. § 766.63(1)

Key Terms:
Marital Property
Mixed Property
Mortgage Payments
Wild Card Exemption