In re Galvin

Citation: 583 B.R. 262Docket: Case No. 17–13786–JGR

Court: United States Bankruptcy Court, D. Colorado; March 2, 2018; Us Bankruptcy; United States Bankruptcy Court

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Dr. Michael David Galvin, a licensed psychologist, filed for Chapter 13 bankruptcy relief in April 2017, listing significant unsecured debts totaling $109,639 and assets valued at $190,032. Among his assets, he claimed a 2017 Winnebago Navion 24J RV as exempt under Colorado's homestead exemption law. The Chapter 13 Trustee, Douglas B. Kiel, objected to this exemption, prompting an evidentiary hearing where Dr. Galvin testified. The central legal issue was whether the Colorado homestead exemption applies to a motor home. The Court ultimately concluded that it does not. 

Dr. Galvin's financial history includes the sale of his previous home and commercial real estate, generating proceeds used to purchase the RV and a vehicle titled in his spouse's name. His bankruptcy plan proposed monthly payments of $200 for 36 months, totaling $7,200, which would yield a minimal payout of about 3 cents on the dollar to unsecured creditors, who collectively filed claims amounting to $34,533.67. The bankruptcy court has jurisdiction over this contested matter under relevant U.S. Code provisions.

11 U.S.C. § 1325(a)(4) mandates that unsecured creditors must receive payments under a bankruptcy plan that are at least equal to what they would receive in a Chapter 7 liquidation. If Dr. Galvin's RV is exempt, his plan meets the 'best interests of creditors' requirement. However, if the RV is not exempt, creditors with allowed claims would be fully paid in a Chapter 7 case, preventing confirmation of the proposed plan.

The RV, purchased in summer 2016, was financed by proceeds from selling commercial real estate and a former residence. Dr. Galvin claims the RV as a homestead exemption to protect non-exempt proceeds from creditors. The Court determined the RV is not exempt, so the question of good faith in filing for bankruptcy is irrelevant. The RV is a Winnebago model 24J with residential amenities, including sleeping quarters, kitchen facilities, and plumbing, and is about 25 feet long. Dr. Galvin testified that he and his wife lived in the RV full-time after selling their home, utilizing it as their primary residence while traveling.

In Colorado, individuals cannot use federal exemptions under 11 U.S.C. § 522(d) but must adhere to state statutes, specifically C.R.S. § 13-54-107. The Colorado Homestead Exemption, outlined in C.R.S. § 38-41-201, protects homesteads from execution and attachment for debts, with an exemption amount of $75,000 for occupied homes and $105,000 for elderly or disabled owners. Dr. Galvin, aged 76, qualifies for the higher exemption amount.

The Homestead Exemption in Colorado, established within the Colorado Revised Statutes, was expanded in 1982 to include mobile homes, recognizing the increasing importance of mobile homes as affordable housing options for the elderly and low-to-moderate income groups. The legislative declaration emphasized that mobile homes are a significant investment, often permanently located, and that improvements have enhanced their quality. It noted their dual nature as personal property and their movement capability, justifying their inclusion in the homestead exemption.

C.R.S. 38-41-201.6 was enacted to formalize the mobile home homestead exemption, initially limited to mobile homes. In 1983, the statute was further amended to include manufactured homes, and in 2000, trailers and trailer coaches were added to the exemption. The current statute defines eligible properties as manufactured homes, trailers, and trailer coaches, all entitled to the same exemptions as conventional homes, except for obligations incurred before specified dates (January 1, 1983, for manufactured homes and July 1, 2000, for trailers). Definitions for trailers and trailer coaches outline their characteristics, emphasizing their design for residential occupancy or transport of goods. Each expansion has been specifically limited to defined property types.

C.R.S. 42-1-102(106)(b) defines a manufactured home as a preconstructed building unit designed for residential occupancy, manufactured off-site, and not licensed as a vehicle. Mobile homes, defined in C.R.S. 38-12-201.5(2) and C.R.S. 5-1-301(29), also require a special permit to be drawn on public highways. In contrast, an RV has motive power, is licensed as a motor vehicle, and does not require a special permit for road use; it is classified as a motor home under C.R.S. 42-1-102(57).

In the case of In re Romero, the Bankruptcy Court ruled that a Peterbuilt Truck used as a home did not qualify for Colorado's homestead exemption because it did not fit the definitions of a mobile or manufactured home. The ruling emphasized that the homestead exemption requires an association with real property, and the court noted that Colorado's exemptions should be interpreted liberally in favor of residents. However, the court concluded that the General Assembly intended to exclude vehicles like motor homes from these exemptions.

Dr. Galvin contends that his RV qualifies as a manufactured home, citing C.R.S. 38-29-102(6), which does not explicitly exclude vehicles. However, this argument fails to recognize C.R.S. 42-1-102(106)(b), which specifies that manufactured homes must be "without motive power" and comply with federal safety standards. Thus, Dr. Galvin's RV does not meet the definition of a manufactured home.

The federal definition of 'manufactured home' excludes self-propelled recreational vehicles, such as motor homes. Therefore, a motor home does not qualify for the protections of the Colorado homestead exemption. In 2015, the Colorado Legislature increased the homestead exemption amounts, raising the standard exemption from $60,000 to $75,000 and the elderly or disabled exemption from $90,000 to $105,000. Additionally, the legislature amended the motor vehicle exemption to explicitly exclude motor homes and various other vehicles. The legislature's decision not to include motor homes in the homestead exemption, despite having amended exemptions for other types of housing, indicates a deliberate policy choice. The Court affirms that it is bound by the statutes and must adhere to the specific exemptions provided. Consequently, the Trustee's objection to the claimed exemption is upheld, the confirmation of the Debtor's chapter 13 plan is denied, and the Debtor is granted until March 23, 2018, to file an amended plan, or the case will be dismissed.