Exemption May Not Be Claimed as 100% FMV

Posted by NCBRC - March 2, 2012

The Bankruptcy Appellate Panel for the First Circuit found that a debtor may not claim an exemption in property in the amount of 100% of the fair market value. In re Massey, No. 11-60 (B.A.P. 1st Cir., Feb. 27, 2012). The court mischaracterized the issue as whether a debtor was permitted to exempt an asset “in kind,” thereby entitling the debtor to the actual asset regardless of whether its value exceeds the statutory limit. This is not the purpose of the 100% FMV exemption, however, and the Massey decision simply bypasses the unequivocal statement by the Supreme Court that an exemption may be claimed in the amount of 100% of the FMV. Schwab v. Reilly, 560 U.S. __,130 S.Ct. 2668 (2010).

In its amicus brief, NACBA argued that under section 522(d)(1) and (2) a debtor is permitted to exempt his aggregate “interest” in certain property up to a specified amount. Listing the exemption as 100% of the FMV alerts the trustee to the fact that the debtor intends to exempt the asset to extent of its actual value or the statutory cap, whichever is lower. Based upon the description in the petition of the interest sought to be exempted, in this case 1/3 of the value of real estate, the trustee has sufficient information to determine the efficacy of objecting to the exemption. Thus, as directed by the Code, the debtor’s claimed exemption refers to his “interest” in the asset and its “value” is a matter for evidentiary hearing if the description of the property puts the trustee on notice that its value may exceed the cap.

The court did not address the issue of who is entitled to capture post-petition appreciation in exempt property.

Massey opinion


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