U.S. High Court Seeks View of Solicitor General in Bankruptcy Exemption Case

WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on Dec. 3 asked the U.S. solicitor general to provide perspective on whether a bankruptcy court has the power to levy a financial charge against a Chapter 7 debtor's residential property, which he has claimed falls under the homestead exemption (Stephen Law v. Alfred Siegel, No. 12-5196, U.S. Sup.).

Homestead Exemption

In 2004, Stephen Law filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the Central District of California.  He listed his home property value as $363,348 and sought a homestead exemption.

The Chapter 7 trustee, Alfred Siegel, did not object to the homestead exemption.

Two years later, the trustee moved to surcharge Law's homestead exemption $75,000, but Law contends that he was not properly served in the process.

Lien

The trustee had argued that Law defrauded his creditors by filing a phony lien against his property to take value out of the property.

The Bankruptcy Court granted the trustee's surcharge, and Law appealed to the U.S. Bankruptcy Appellate Panel (BAP) for the Ninth Circuit.  The BAP reversed the surcharge order, concluding that it was "not warranted."

The trustee appealed to the Ninth Circuit U.S. Court of Appeals, which reversed the BAP's ruling and determined that the surcharge was proper.  Law appealed to the Supreme Court.

Reversal Sought

Law argues that the Supreme Court should reverse the Ninth Circuit's ruling and order the trustee to pay him the $75,000 surcharge pertaining to the homestead exemption.

Law maintains that the surcharge in question is not permitted against his property because it is protected by the homestead exemption.

Law is represented by Matthew Hellman of Jenner & Block in Washington.  The trustee is represented by David Seror of Ezra Brutzkus Gubner in Woodland Hills, Calif.

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