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Jasmine Z. Keller v. Steven R. Johnson
Citation: Not availableDocket: 02-6042
Court: Court of Appeals for the Eighth Circuit; February 3, 2003; Federal Appellate Court
Original Court Document: View Document
The United States Bankruptcy Appellate Panel for the Eighth Circuit affirmed the bankruptcy court's decision denying Chapter 13 Trustee Jasmine Z. Keller's objection to Steven R. Johnson's homestead exemption claim under 11 U.S.C. § 522(d)(1). The primary issue was whether Johnson's lien interest in real property occupied by his dependent child and former spouse could be exempted from the bankruptcy estate. The court found that the real property served as the residence for Johnson’s minor child, who qualifies as a dependent. Johnson claimed an exemption for his lien interest in the property, which the Trustee contested, arguing that under Minnesota law, a lien is not considered an interest in real property but rather personal property. The court clarified that the Bankruptcy Code allows for the exemption of a debtor's aggregate interest in real property used as a residence by a dependent, stating that a lien is indeed an interest in real property under the definition provided in the Code. Thus, the court ruled in favor of Johnson, emphasizing that exemption statutes should be interpreted liberally in favor of the debtor. The appeal was submitted on January 15, 2003, and the ruling was filed on February 4, 2003. The Trustee contends that state law determines the Debtor's interest in property, specifically citing Butner v. United States. Under Minnesota law, a lien does not constitute an interest in real property, as established in several cases. Consequently, the Debtor is deemed to have no interest in the Real Property. The Trustee argues that the lien is personal property, which only qualifies for exemption if a minor child resides in it; since one cannot reside in a lien, it does not qualify for exemption. Typically, state law guides the determination of property interests. If the Debtor had chosen Minnesota exemptions under 11 U.S.C. § 522(b), the Trustee's position would hold, affirming that the lien does not qualify for exemption under Minnesota’s homestead statutes. However, Minnesota allows debtors to select either federal or state exemptions in bankruptcy filings. With the Debtor electing federal exemptions, federal statutory interpretation prevails, specifically referencing the definition of a lien in 11 U.S.C. § 101(37). Since the federal statute is clear, state law need not be consulted. The outcome under federal exemptions differs from that under state exemptions, reflecting the Minnesota legislature's acknowledgment of potential differences based on the exemption scheme chosen by the debtor. The Debtor is entitled to an exemption in the Real Property under 11 U.S.C. § 522(d)(1), and the decision is affirmed. Notably, the dollar limit for a nonagricultural homestead under Minnesota law is $200,000, whereas under federal law, it is $17,425, suggesting that debtors may opt for federal exemptions when state exemptions are unavailable.