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In re Alley (Case No. 06-70118) 11/9/2006

The Chapter 7 trustee objected to the debtors’ claim of homestead exemptions, arguing that the debtors failed to comply with the requirements of Va. Code § 34-17 by not recording the homestead deed until six days after the debtors’ meeting of creditors.  Under Va. Code § 34-17, “[t]o claim an exemption in bankruptcy, a householder . . . shall set such real or personal property apart on or before the fifth day after the date of the meeting held pursuant to 11 U.S.C. § 341, but not thereafter."  Each debtor executed a homestead deed for recordation and the debtors' counsel mailed the properly executed deeds to the Clerk of Pulaski County Circuit Court.  Unbeknownst to the debtors' counsel, Pulaski County adopted a local rule which required that a cover page accompany deeds, therefore, the deeds were sent back to counsel because they were not accompanied by cover pages.  Debtors' counsel then added the required cover pages and hand delivered the documents to the Clerk on the sixth day after the meeting of creditors.  The Court found that the debtors’ homestead deeds were valid pursuant to § 34-17, even though it wasn't recorded until the sixth day after the meeting of creditors because the under Virginia law, the homestead deed need not be admitted to record for property to be "set apart in bankruptcy"; rather, a debtor has "set apart" property claimed as exempt once the debtor has delivered a properly executed deed, with fees, paid, to the appropriate clerk.  See In re Nguyen, 226 B.R. 547, 551 (Bankr. E.D. Va. 1998).

Date: 
Thursday, November 9, 2006
Category: 
Exemptions
Homestead Deed
Statutory Construction
Chapter: 
7