Matter Martin Szekely and Donna Szekely - United States Court of Appeals for the Seventh Circuit

Matter Martin Szekely and Donna Szekely

By United States Court of Appeals for the Seventh Circuit

  • Release Date - Published: 1991-07-02
  • Book Genre: Law
  • Author: United States Court of Appeals for the Seventh Circuit
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Matter Martin Szekely and Donna Szekely United States Court of Appeals for the Seventh Circuit read online review & book description:

POSNER, Circuit Judge This bankruptcy appeal raises a surprisingly fundamental, and difficult, question (assuming we can get
over a jurisdictional hurdle), on which we are unable to find any authority. The question is whether if a debtor continues
to occupy his home after declaring bankruptcy, the trustee can charge rent to him, notwithstanding the homestead exemption.
The debtors in this case -- a married couple named Szekely, living in Zion, Illinois -- declared bankruptcy (originally under
Chapter 13, later converted to Chapter 7 -- liquidation) on December 5, 1988. One of the assets of the bankrupt estate was
the couple's home, on which there were both a first and a second mortgage. The Bankruptcy Code allows a state to require debtors
to use the state's exemptions rather than the exemptions set forth in the Code itself. 11 U.S.C. § 522(b)(1); First National
Bank v. Norris, 701 F.2d 902, 904 (11th Cir. 1983). Illinois has taken up this option, and as a result each of the Szekelys
was "entitled to an estate of homestead to the extent in value of $7,500," for a total of $15,000. Ill. Rev. Stat. ch. 110,
paras. 12-901, 12-1201. The Szekelys continued living in their home, though they made no payments on either mortgage. In April, the trustee asked
the bankruptcy judge to order the couple to pay rent. Two months later the bankruptcy judge granted the trustee's request
and fixed the rent at $600 a month, though it was understood that since the Szekelys couldn't pay, the rent would accrue,
and would be deducted from their homestead exemption when the house was sold. In September, although the house hadn't been
sold yet, the Szekelys vacated it, owing eight months' accrued rent -- $4,800. In February of the following year, the district
judge affirmed the bankruptcy judge's rent order. 111 Bankr. 681 (N.D. Ill. 1990). The Szekelys now appeal the district judge's
order to us. We were told at argument that the house has now been sold, for about $135,000, which is $30,000 more than the
amount owing on the two mortgages and therefore enough to cover the entire homestead exemption. Yet if we affirm, the trustee
will give the Szekelys only $10,200 ($15,000-$4,800).

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