Exempt property

On Behalf of | Aug 29, 2010 | Bankruptcy |

In a case out of the Southern District of Texas styled In re White the Chapter 13 debtor objected to the claim of the debtor’s former spouse, asserting that the secured claim she asserted as to the debtor’s homestead was invalid.

The divorce decree awarded the debtor a fee simple interest in the homestead, and awarded the claimant $30,000, secured by a lien in the homestead.  The divorce decree was not recorded in the county in which the property was located.  The claimant filed a proof of claim for $6,800 (the amount remaining due on the $30,000), secured by the homestead.
The debtor objected to the claim, contending that the security interest was unenforceable against the debtor and debtor’s property because it was unperfected.  The court disagreed, holding that under the Texas Property Code, the unrecorded divorce decree bound the debtor and the claimant, as parties to the decree.
The court also held that the lien created by the divorce decree was a judicial lien, not avoidable under the Bankruptcy Code because the divorce decree extinguished the preexisting joint interest of the debtor and the debtor’s spouse in the property and created a fee simple interest in the debtor which was not possessed before the lien was “fixed.”