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In re Little

September 24, 2007

IN RE ANTHONY LITTLE AND CHARLOTTE LITTLE, DEBTORS.
CFCU COMMUNITY CREDIT UNION, APPELLANT,
v.
ANTHONY LITTLE, ET AL., APPELLEES.



Bankr. Case No. 05-69113

MEMORANDUM-DECISION AND ORDER

Appellant CFCU Community Credit Union ("CFCU") filed with this Court a Notice of Appeal from an Order of the United States Bankruptcy Court for the Northern District of New York (Gerling, Chief B.J.), entered on August 21, 2006, denying CFCU's motion for an order limiting the claim of homestead exemption sought by Appellees Anthony and Charlotte Little ("Debtors"). CFCU contends that the Bankruptcy Court incorrectly allowed Debtors to claim an increased homestead exemption based on an amendment to New York law enacted on August 30, 2005. The Court has jurisdiction under 28 U.S.C. § 158(a). For the following reasons, the August 21, 2006 decision of the Bankruptcy Court is affirmed.

I. Background

Debtors filed a Chapter 7 bankruptcy petition on October 2, 2005 and converted the petition to a Chapter 13 bankruptcy on March 23, 2006. CFCU holds secured loans on two motor vehicles owned by Debtors; the total unsecured debt owed to CFCU at the time Debtors filed for bankruptcy was $7,161.00. See Schedule D, Creditors Holding Secured Claims (Dkt. No. 2, Attach. 3). In their petition, Debtors claimed a homestead exemption in the amount of $41,537.00, which represents all the equity in their residence. Debtors claimed this exemption under New York Civil Practice Law and Rules Section 5206(a) ("CPLR 5206(a)"), which allows an individual judgment debtor to exempt from application to the satisfaction of a money judgment up to $50,000.00 in value, above liens and encumbrances, of his or her principal residence. N.Y. C.P.L.R. 5206(a) (Consol. 2007). New York amended CPLR 5206(a) on August 30, 2005 to increase the homestead exemption available to debtors from $10,000.00 to $50,000.00. In re Little, No. 05-68281, 2006 Bankr. LEXIS 1010, at *2 (Bankr. N.D.N.Y. Apr. 24, 2006). On June 13, 2006, CFCU moved for an order from the Bankruptcy Court disallowing Debtors' claimed homestead exemption. See CFCU Amended Motion (Dkt. No. 2, Attach. 2). CFCU argued that Debtors could not claim an exemption under the amended CPLR 5206(a), and instead were limited to the previous $10,000.00 homestead exemption because CFCU's claim was based on a loan made prior to the amendment's effective date. Id. Chief Judge Gerling denied CFCU's motion on August 21, 2006. Gerling Order (Dkt. No. 2, Attach. 13). The instant appeal followed.

II. Standard of Review

In reviewing the rulings of a bankruptcy court, a district court applies the clearly erroneous standard to a bankruptcy court's conclusions of fact, and reviews conclusions of law de novo. Yarinsky v. Saratoga Springs Plastic Surgery, 310 B.R. 493, 498 (N.D.N.Y. 2004) (Hurd, D.J.) (citing to In re Manville Forest Prods. Corp., 209 F.3d 125, 128 (2d Cir. 2000)); In re Petition of Bd. of Dirs. of Hopewell Int'l Inst. Ltd., 275 B.R. 699, 703 (Bankr. S.D.N.Y. 2002); FED. R. BANKR. P. 8013.

III. Discussion: Does the Amendment to CPLR 5206(a) Apply Retroactively to Debt Incurred Prior to August 30, 2005?

A. Homestead Exemptions in Bankruptcy

After filing a bankruptcy petition, a debtor may, pursuant to Bankruptcy Code § 522(b), exempt certain property from the property of the bankruptcy estate created by the petition.11 U.S.C. § 522(b). As allowed by Code § 522(b)(2), New York has opted out of the federal exemption scheme and provided its own set of permissible exemptions for debtors domiciled in the state. See In re Nudo, 147 B.R. 68, 70 (Bankr. N.D.N.Y. 1992) (Gerling, B.J.). New York Debtor and Creditor Law § 282 identifies the homestead exemption in CPLR 5206(a) as a permissible bankruptcy exemption. N.Y. DEBT. & CRED. LAW§ 282. CPLR 5206(a) states:

a) Exemption of homestead. Property of one of the following types, not exceeding fifty thousand dollars in value above liens and encumbrances, owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof:

1. a lot of land with a dwelling thereon,

2. shares of stock in a cooperative apartment corporation,

3. units of a condominium ...


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