Lowe v. DeBerry (In re DeBerry), No. 14-5046-CAG, 2015 WL 6528024, at *1 (Bankr. W.D. Tex. Oct. 28, 2015).
Opinion issued Oct. 28, 2015. Westlaw Link.
Written by: Garrett Brooks, Staff Member
Upon filing for Chapter 7 bankruptcy, the debtor claimed his home was exempt property under the Texas constitution and the Texas Property Code. After his initial filings, the debtor motioned to sell the property, which the court granted. However, since the proceeds from the sale were not reinvested into a new homestead property within six months of the sale, thereby violating the Texas Proceeds Rule, the trustee attempted to recover the assets. The debtor claimed the trustee could not recover the homestead sale proceeds because they were not property of debtor’s estate.
The court granted the debtor’s motion for dismissal, finding that proceeds from a post-petition sale of property qualified as a Texas homestead are not subject to the Texas Proceeds Rule. In deciding this case, the court reasoned that if a homestead is held at the time of the petition and properly exempted at the time of the sale, the proceeds are not and cannot become part of the bankruptcy estate. The court further distinguished the case from a Chapter 13 proceeding because in Chapter 7 property of the estate does not include funds acquired post petition. Because the proceeds were never property of the estate, the trustee could not avoid the transfer.
The primary factor in allowing the debtor to keep the sale proceeds is the timing of the sale—here, the sale took place post-petition, which means the property itself was never apart of the estate. Moving forward, it is important to note that future cases about post-petition sales of properly exempted homesteads in Chapter 7 bankruptcy cases could go either way. Currently, there is no controlling precedent from the Fifth Circuit Court of Appeals, so debtors should still be cautious about not investing proceeds within a six-month period.
 Lowe v. DeBerry (In re DeBerry), No. 14-5046-CAG, 2015 WL 6528024, at *1 (Bankr. W.D. Tex. Oct. 28, 2015).
 Id.; see Tex. Prop. Code Ann. § 41.001 (“a claimant’s proceeds of a sale of a homestead are not subject to seizure for a creditor’s claim for six months after the date of sale.”).
 In re Deberry, 2015 WL 6528024, at *2.
 Id. at *2, *4(the requirement that proceeds from the sale of a homestead must be reinvested into another Texas homestead for the proceeds to be exempt under Tex. Prop. Code Ann. § 41.001(c) is commonly referred to as the “Texas Proceeds Rule”).
 Id. at *3. In D’Avila, the court held that once an exemption is granted in a Chapter 7 bankruptcy, the debtor can sell, exempt, or encumber property without involving the bankruptcy court or estate In re D’Avila, 498 B.R. 150, 158 (Bankr. W.D. Tex. 2013).
 Id. at *4.
 The prior case law discussed by the court involved either a debtor in Chapter 13, or Chapter 7 debtors who claimed exempted homestead proceeds at the time of filing, not post petition. Id. at *3.