U.S. Bankruptcy Court
Where an unsecured judgment creditor has objected to a claimed homestead exemption, the objection should be overruled because the creditor has failed to sustain its burden of proof that the fair market value of the debtor’s interest in real property was increased as a result of non-exempt property disposed of by the debtor with the intent to hinder, delay or defraud the creditor.
“This matter came before the Court on the Objection to Debtor’s Claim of Homestead Exemption Under Mass. Gen. Laws ch. 188, §3 (‘Objection’) filed by Metropolitan Life Insurance Company (‘MetLife’). MetLife is an unsecured creditor of the debtor, Eric A. Beard, holding a judgment for unjust enrichment. Pursuant to the Objection, MetLife alleges that the Debtor’s homestead exemption in 5 Waban Street, Natick, MA (‘Property’) should be reduced under Section 522(o) of the Code. MetLife asserts that the Debtor spent nonexempt cash with the intent to hinder, delay or defraud MetLife to make improvements that increased the value of his interest in the Property. …
“… Although MetLife has shown that the Debtor made transfers of nonexempt property within ten years to improve the Property, MetLife failed to show that the transfers were made with the intent to hinder, delay, or defraud MetLife. MetLife has also failed to show the extent of the increase in the fair market value of the Property as a result of the transfers. …
“… The Court finds that the Debtor’s intent was to restore the house to habitability, which was a legitimate purpose. …
“There is no showing that the Debtor was evading MetLife. At the time of these payments, the Debtor was aware that MetLife was asserting that it had made an overpayment and that it had asked him to return the overpayment. But there is no evidence that MetLife was pursuing collection efforts against the Debtor until the Fall of 2016, after the payments were made. …
“… Without any ongoing collection efforts by MetLife, or other indication of fraudulent intent by the Debtor as to MetLife, payments to pre-existing creditors fail to support a finding that the Debtor made them with intent to hinder, delay, or defraud MetLife. …
“… MetLife has offered no evidence on the fair market value of the Property before or after the improvements. Instead, it offered only changes in assessed value from one unknown time period to another period. The evidence fails to distinguish how much of the assessed value increase was a result of the improvements made or undertaken prior to the notification, including the roof and second floor improvement, and how much was attributable to the improvements after the notification. It fails to identify what improvements were considered in determining the assessed values. Given the lack of evidence, the Court is unable to make any finding as to the amount of any change in the fair market value of the Property as a result of the improvements. …
“For the foregoing reasons, the Court finds that MetLife has failed to sustain its burden of proof that the fair market value of the Debtor’s interest in the Property was increased as a result of nonexempt property disposed of by the Debtor with the intent to hinder, delay or defraud MetLife. …”
In Re: Beard, Eric A. (Lawyers Weekly No. 04-015-24) (23 pages) (Bostwick, J.) (Chapter 13 Case No. 19-11823-JEB) (Oct. 15, 2024).
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