Bankruptcy Judge Robert J. Kressel of Minneapolis is someone who still believes that bankruptcy courts are courts of equity. He allowed a debtor to claim a homestead exemption in a house inherited within 180 days of bankruptcy.

At the time of bankruptcy, the debtor lived in a home owned by her mother and father. In her petition, she claimed no homestead exemption.

Both parents died within 180 days of her bankruptcy. The debtor amended her schedules to claim a homestead exemption in the house she inherited from her parents. The trustee objected to the exemption, contending that the right to an exemption is fixed on the date of filing.

Judge Kressel disagreed, although he conceded that exemptions and their value are ordinarily determined as of the filing date.

For property that comes into an estate after filing, Judge Kressel noted that Section 522(a)(2) values the property as of the date it comes into the estate. He also noted that Section 522 does not limit exemptions to property in the estate at the time of filing.

Judge Kressel allowed the exemption, following a 2011 decision by Chief Bankruptcy Judge Cecelia Morris of the Southern District of New York holding that exemptions are not limited to property owned on the filing date.

Ruling for the trustee would have turned the bankruptcy case into a peculiarly inequitable proceeding. Had the parents died before bankruptcy, she would have been entitled to the homestead exemption. Had the parents survived, the bankrupt could have remained living in the home with her parents. If the parents had died more than six months after bankruptcy, the debtor could have retained the home exempt from creditors’ claims.

Were the home not exempt following her parents’ deaths within six months of filing, bankruptcy would have meant the loss of a home she could have kept in any other circumstances.