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Retroactive application of Increased homestead exemption; Part II: Calloway and Nguyen

In re: Tanya Calloway 09-12133 (Judge Bucki; Feb. 16, 2010); In re Nguyen Bk 05-92833 (Judge Bucki Sept. 22, 2009). In August 2005, New York increased its "homestead exemption" from $10,000 to $50,000. In a previous bankruptcy case out of Rochester (I was the trustee), a creditor had asserted that the change only applied to debts that would be incurred after the change, not retroactively. Several bankruptcy and district courts disagreed, and held that the statute was retroactive, a position adopted by the Second Circuit: CFCU Community Credit Union v. Hayward, 552 F.3d 253 (2nd Cir. 2009).

In th Calloway case (attached), the debtor seeks to avoid a judicial lien against her house, and the creditor opposes the motion. The creditor attempts to differentiate Hayward because in this new case it is an actual judgment lien, not just a debt, which existed prior to the August 2005 change. The creditor's position is that it would be unconstitutional for them to be deprived of their property rights (their lien against the unexempt homestead) by a legislative action. They also claim that it would be a misinterpretation of the statute.

The bankruptcy court disagreed. Following a similar decision by fellow Buffalo Judge Kaplan, In re Trudell, 381 B.R. 441 (Bankr. W.D.N.Y. 2008), Judge Bucki applied the statute retroactively even to judgment liens. Quoting an old New York Court of Appeals case, Watson v. New York Central Railroad Company, 47 N.Y. 157, 162 (1872), "a judgment creditor of an owner has no estate or proprietary interest in the land." Judge Bucki had previously ruled on this very issue in an unreported slip opinion in the Nguyen case in September 2009 (attached here).

Post-decision appeals: The Nguyen decision is currently on appeal before the District Court for the Western District of New York (09-cv-00913; Judge Richard J. Arcara). The Calloway decision is also on appeal to District Court (10-cv-00250; Judge William M. Skretny.) The creditors in both the Nguyen and the Calloway appeals are represented on appeal by Attorney Edward Crossmore, the same attorney who appealed Hayward, unsuccessfully, all the way to the Second Circuit.


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