Adopting a plain-meaning approach, the Second Circuit found a debtor may avoid a lien that impairs her exemption on property her dependent son lives in part-time but is not his primary residence. Donovan v. Maresca (In re Maresca), No. 19-3331 (2d Cir. Dec. 14, 2020).
The debtor lived in an apartment, and her ex-husband lived in the marital residence (the Property) which he and the debtor owned jointly. They had joint custody of their dependent son whose primary residence was with his mother but who spent several days a week with his father in the Property as his “non-primary” residence. At the time the debtor filed for chapter 7 bankruptcy, her divorce lawyer had a judgment lien on the Property securing almost $71,000 in legal fees. She claimed an exemption on her interest in the Property under section 522(d) and sought to avoid the lien under section 522(f)(1)(A) as impairing that exemption. The bankruptcy court granted the debtor’s motion to avoid the lien. The district court affirmed.
On appeal, the lienholder argued that “residence” within the meaning of section 522(d) should be read as the primary residence of either the debtor or her dependent. The Second Circuit began with the language of section 522(d) which allows a debtor to exempt her “interest, not to exceed $15,000 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence.” The court noted that this provision does not say “principal” or “primary” residence, and the definition of “residence” in Black’s Law Dictionary contemplates the possibility of a person having more than one. These observations, in addition to the fact that Congress limited “residence” to “principal” residence in other provision such as section 1322(b)(2) which was enacted at the same time as section 522(d), suggested that the absence of the qualifier in section 522(d)(1) was deliberate.
The court rejected the lienholder’s argument that it should adopt the state-law approach under which a debtor’s residence under section 522(d)(1) is defined according to the relevant state’s definition of “homestead” which is typically limited to the homeowner’s principal residence. The court found that principles of statutory construction support the plain-meaning approach without reference to state law. In fact, if the court were to adopt the state’s homestead law in this case for its definition of residence, it would create a conflict as Connecticut’s homestead law requires that the homeowner actually reside in the property while section 522(d) specifically applies to a debtor or a dependent. The court acknowledged that the legislative history of section 522(d) also referred to the debtor’s “homestead,” but found that was not sufficient to overcome the plain language of the provision.
The court concluded that “[t]he text of the statute, then, militates quite clearly in favor of interpreting the term ‘residence’ in § 522(d)(1) to include both primary and non-primary residences.” It affirmed.
The lienholder’s petition for rehearing was denied on January 5, 2021.
Tags: Exemptions
