United States District Court, N.D. Alabama, Northeastern Division
MEMORANDUM OPINION AND ORDER
MADELINE HUGHES HAIKALA UNITED STATES DISTRICT JUDGE
action, appellant Redstone Federal Credit Union challenges a
Bankruptcy Court order overruling Redstone's objection to
appellee Steven Brown's claim of a homestead exemption
“in an amount up to $15, 000, ” the maximum
exemption available under Alabama law when Mr. Brown filed
his Chapter 13 bankruptcy petition. Redstone argues that Mr.
Brown is entitled to an exemption of only $5, 000, the
maximum exemption available under Alabama law when Mr. Brown
incurred the debt that produced a judgment lien on his
property. For the reasons discussed below, the Court affirms
the Bankruptcy Court's order.
JURISDICTION AND STANDARD OF REVIEW
Court has jurisdiction over Redstone's appeal under 28
U.S.C. § 158(a)(1). Section 158(a)(1) states: “The
district courts of the United States shall have jurisdiction
to hear appeals from final judgments, orders, and decrees . .
. of bankruptcy judges entered in cases and proceedings
referred to the bankruptcy judges under section 157 of this
title.” 28 U.S.C. § 158(a)(1).
district court “functions as an appellate court in
reviewing bankruptcy decisions.” In re Piper
Aircraft Corp., 362 F.3d 736, 738 (11th Cir. 2004)
(quoting In re Glados, 83 F.3d 1360, 1362 (11th Cir.
1996)). “In reviewing a bankruptcy court judgment as an
appellate court, [a] district court reviews the bankruptcy
court's legal conclusions de novo.” In
re Englander, 95 F.3d 1028, 1030 (11th Cir. 1996).
PROCEDURAL HISTORY AND FACTUAL BACKGROUND
Brown owns property in Hartselle, Alabama. (Doc. 4-13, p.
10). On May 27, 2016, Redstone obtained a $5, 355.34 judgment
plus $282.30 in court costs against Mr. Brown. (Doc. 4-4, p.
3). The judgment is based on credit card debt. The purchases
that constitute the credit card debt occurred in February of
2014. (Doc. 4-18, pp. 1, 5). On July 11, 2016, Redstone
recorded the judgment in Morgan County, Alabama. (Doc. 4-4,
p. 3). The judgment became a lien against Mr. Brown's
November 3, 2017, Mr. Brown filed a Chapter 13 bankruptcy
petition in the United States Bankruptcy Court for the
Northern District of Alabama. (Doc. 4-13). In his bankruptcy
schedule of assets, Mr. Brown valued the Hartselle property
at $109, 900 (Doc. 4-13, p. 10) and indicated that Fay
Servicing is a secured mortgagee of the property with a claim
of $100, 203 in the property (Doc. 4-13, p. 18). Thus,
according to his bankruptcy petition, Mr. Brown holds $9, 697
in equity in the Hartselle property. In his bankruptcy
petition, Mr. Brown claimed a homestead exemption of $10,
916.95 for the Hartselle property. (Doc. 4-13, p. 16).
December 20, 2017, Mr. Brown asked the Bankruptcy Court for
an order “avoiding the judicial lien” on the
Hartselle property. (Doc. 4-16, p. 1). Relying on the
homestead exemption in place when he filed his bankruptcy
petition, Mr. Brown argued that there was “no equity in
said property for the lien to attach.” (Doc. 4-16, p.
2, ¶ 6). On December 27, 2017, Redstone answered the
motion and requested a hearing. (Doc. 4-20).
January 2, 2018, Redstone objected to Mr. Brown's request
for “an exemption of the equity in the real estate in
an amount up to $15, 000.” (Doc. 4-16, p. 2, ¶ 5;
Doc. 4-18). Redstone argued that Mr. Brown's homestead
exemption should not exceed $5, 000 because Alabama Code
§ 6-10-1 states: “The right of homestead or other
exemption shall be governed by the law in force when the debt
or demand was created.'” (Doc. 4-18, p. 1, ¶
6). Redstone argued that Mr. Brown's debt arose in
February of 2014, and, at the time, Alabama law capped
homestead exemptions at $5, 000. (Doc. 4-18, p. 1, ¶ 7).
a hearing on January 22, 2018, the Bankruptcy Court overruled
Redstone's objection. (In re Brown, No.
17-83317-CRJ (Bankr. N.D. Ala. 2018) Jan. 22, 2018, hearing
audio transcript (on file with the Court) 10:24:10 a.m.
(hearing time); 2:33 (tape time)). The Bankruptcy Court
stated that it had ruled against Redstone on this identical
issue previously. (Id. at 10:22:02 a.m. (hearing
time); 0:21 (tape time)). The Bankruptcy Court added:
“There also are mixed debts in the case where the [ ]
exemption [ ] under ruling by my colleague down in the
Southern District would be you follow the new
exemption.” (Id. at 10:22:36 a.m. (hearing
time); 0:56 (tape time)). In an order dated January 23, 2018,
the Bankruptcy Court ruled:
For the reasons stated on the record and in conformity with
prior decisions of the Court holding that Alabama's new
homestead exemption in effect on the petition date is
controlling in mixed debt cases, the Court finds that the
Objection to Debtor's Claim of Exemptions should be
(Doc. 4-19, p. 1).
6-10-2 of the Alabama Code governs homestead exemptions. When
Mr. Brown filed his bankruptcy petition in 2017, Section
6-10-2 provided (and still provides):
The homestead of every resident of this state, with the
improvements and appurtenances, not exceeding in value
fifteen thousand dollars ($15, 000) . . ., shall be, to the
extent of any interest he or she may have therein, . . .
exempt from levy and sale under execution or other process
for the collection of debts during his or her life and
occupancy . . . .
Ala. Code § 6-10-2 (1975). The Alabama Legislature
increased the exemption from $5, 000 to $15, 000 in 2015.
2015 Alabama Laws Act 2015-484 (S.B. 327). In his bankruptcy
petition, Mr. Brown reported debts that he incurred before
and after the Alabama Legislature amended § 6-10-2.
(Doc. 4-13, p. 18-25). Thus, this is a “mixed”
debt case. A mixed debt bankruptcy case is a case “with
debts arising both before and after the
June 11, 2015 change ...