In this bankruptcy, chapter 7 only Mrs. Scotti held title to the residence which was located at their residence in Columbia, South Carolina. According to the bankruptcy schedules there were two mortgages against the residence in the total amount of $85,723.00 and there was a judgment lien against the residence in the total amount of $111,400.00. The home was valued on Schedule D in the amount of $160,000.00. The two mortgages and the judgment was in both debtors’ names.
The debtors filed their motion to avoid the judicial lien and sought to claim an exemption in the amount of $74,277.00 in their residence. Debtors claimed this was the proper amount to exempt because this represented an exemption of $49,875.00 for Mr. Scotti and a $24,402.00 exemption for Mrs. Scotti.
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Although Mr. Scotti did not actually own the property, he claimed that his possessory interest was sufficient to allow him to take an exemption in the property. He based his argument on 11 U.S.C. 522(a)(1) because as a spouse of Mrs. Scotti he was a dependent under this code section. In South Carolina the statutory exemption statute is $100,000.00 for a married couple.
However, the court pointed out that although this was a joint chapter 7 bankruptcy filing, Mr. Scotti had and bankrutpcy estate and Mrs. Scotti had a bankruptcy estate. It went on to state that had Mr. Scotti filed his chapter 7 case separately it was clear he could not have claimed an exemption because he did not have an ownership interest in the residence. Moreover, mere possessory interest in a property was insufficient to claim and exemption.
In denying that Mr. Scotti was entitled to claim an exemption in property he did not own, the court pointed to the decision in Cunningham, 5 B.R. 709,710-11 (Bankr. D. Mass. 1980) in which the court rejected the argument that the husband could claim an exemption because he was a dependent of his wife.
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The bottomline for the Scottis in this case was that the court allowed Mrs. Scotti to claim her exemption of $53,375.00 minus $3,500.00 which she already claimed for her income tax return which left her with an exemption of $49,875.00. The court applied the forumula in 11 U.S.C. 522(f) and held that $86,998.00 of the judicial lien was avoidable. The remainder of the lien in the amount of $24,402.00 was held unavoidable and remained attached to the property.
If you have questions about chapter 7 bankruptcy in South Carolina please visit our chapter 7 bankruptcy in South Carolina page. Alternatively, if you have questions about chapter 7 bankruptcy, you may visit that page as well.