Bankruptcy: Exemptions Generally
Take a look at Lawyers Weekly for the week January 18, 1999, wherein the case of Patriot Portfolio v. Weinstein is reported. This case holds that bankruptcy law preempts Massachusetts law and that a creditor could not collect a debt secured by a lien on a Chapter 7 debtor's residence even though the debtor did not file a homestead declaration until after the debt had been contracted.
In Patriot Portfolio a debtor had purchased his property in the 1970s. In 1992 a debtor secured a judicial lien against the property. In 1996 the debtor declared a homestead. A few months thereafter the debtor filed for bankruptcy and claimed a homestead exemption in his residence. The creditor argued that the exemption could not apply because the judgment lien and the debt from which is arose existed before the debtor filed for bankruptcy and that Massachusetts law excepts out from the homestead protection "a debt contracted prior to the acquisition of . . . [the] estate of homestead. The debtor, on the other hand, argued that under §522 of the Bankruptcy Code once a debtor has claimed property as exempt such property is not liable for any pre-bankruptcy debt, unless it is specifically enumerated in that section. The debtor claimed that the Massachusetts statute and the federal law were in conflict and that, therefore, federal law would be deemed to preempt the state statute. But the creditor countered, claiming that the Massachusetts law was not in conflict with the federal law because the state law did not exempt the underlying real estate (which would be in conflict with federal law) but rather defined and created a separate asset—the "estate of homestead"—which was not in derogation of the debtor's otherwise exempt property but rather distinct from it. The court dismissed the argument summarily by stating that "the 19 th century cases [the creditor] relies on for support neither address nor control bankruptcy issues." The court noted that in order for the debtor to successfully claim the homestead property as exempt all that must be shown is that the debtor had an ownership interest in the property before the lien attached and that the avoidance of the lien will entitle the debtor to a state or federal exemption.