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In re Sharp

United States District Court, E.D. Michigan, Southern Division

February 28, 2018

In re MARIQUE SHARP, Debtor

          ORDER DENYING APPELLANT'S BRIEF ON APPEAL [Doc. 5]

          Victoria A. Roberts United States District Judge

         Appellant-Debtor Marique Sharp (“Sharp”) appeals a ruling from the Bankruptcy Court, denying her Motion for Reconsideration. After filing for bankruptcy, Sharp filed an amendment to her schedules, claiming a homestead exemption. Trustee Stuart A. Gold (“Gold”) objected to this amendment, since Sharp transferred the house she sought to exempt to her mother via a quit claim deed before filing for bankruptcy. The Bankruptcy Court sustained the objection and disallowed the amendment. Sharp filed a motion for reconsideration, which the Bankruptcy Court denied. She appeals that decision to this Court.

         Because Sharp voluntarily transferred her interest in her home before she filed for bankruptcy, she cannot claim a homestead exemption, and the Bankruptcy Court ruling is AFFIRMED.

         I. Background

         Sharp and her mother, Yvette Saltmarshall (“Saltmarshall”) reside together at 4574 6th Street, Ecorse, Michigan (“the property”). Sharp was the sole owner of the property, but due to her poor credit and lack of funds, she was unable to acquire homeowners insurance for the property. By quit claim deed recorded on July 24, 2015, Sharp conveyed her interest in the property to Saltmarshall for $1.00. Sharp claims that the transfer was made in order to get homeowners insurance, which was obtained shortly after the transfer. Sharp maintains that she still has an interest in the property, which is not contested by Saltmarshall. According to Sharp, Saltmarshall is also willing transfer the property back to Sharp via quit claim deed, if required or allowed under the law.

         On November 1, 2016, nearly sixteen months after transferring the property to her mother, Sharp petitioned for Chapter 7 bankruptcy. She indicated on her Schedule A/B form that she did not own or have any interest in any property. Sharp also did not claim an exemption in the Ecorse property on her Schedule C form. She disclosed that she lived at the property, but that she transferred the property to Saltmarshall in July 2015.

         On March 14, 2017, Gold filed an adversary proceeding to avoid the transfer of the property to Saltmarshall as a fraudulent transfer under 11 U.S.C. §§ 544(b), 548, 550(a), and the Michigan Uniform Fraudulent Transfer Act. Gold argued that the transfer was fraudulent because: 1) Sharp made the transfer within two years (in accordance with 11 U.S.C. § 548(a)(1)) and six years (in accordance with 11 U.S.C. § 544) of filing her bankruptcy petition; 2) she did not receive reasonably equivalent value of the property in exchange for the transfer, as she only received $1.00; and 3) she was insolvent at the time of the transfer, and reasonably should have believed she would incur debts beyond her ability to pay when due.

         Sharp then filed amendments to the schedules, seeking to claim an interest in the property of $18, 000, and an exemption of $18, 000 in the property pursuant to 11 U.S.C. § 522(d)(1), on April 12, 2017. Gold filed objections to Sharp's claimed exemptions pursuant to § 522(g). His objection was based on Sharp's voluntary transfer of the property to Saltmarshall before filing for bankruptcy. After a hearing, on June 2, 2017, the Bankruptcy Court sustained Gold's objections and denied Sharp's amendments. Sharp filed a motion for reconsideration; Gold objected to it.

         On July 18, 2017, the Bankruptcy Court granted Gold's motion for summary judgment in the adversary case, ordering that the bankruptcy estate had 100% interest in the property, and that it could be liquidated for the benefit of the estate.

         The Bankruptcy Court denied Sharp's motion for reconsideration on August 15, 2017. The Bankruptcy Court found that Sharp failed to establish that a palpable defect occurred, and, inter alia, that Sharp did not own any interest in the property at the time she filed her bankruptcy petition, and thus could not exempt it on her schedules.

         On appeal, Sharp argues that the Bankruptcy Court: 1) erred in not allowing her to claim an exemption based on her fraudulent concealment of the property; and 2) created an appearance of judicial bias by allowing Gold to file a late response to her motion for reconsideration (43 days after she filed the motion), and by denying her motion to strike Gold's response.

         Gold argues that the Bankruptcy Court: 1) did not rely on equitable considerations, but on the language of § 522(g), in disallowing Sharp to claim an exemption; and 2) did not err in denying Sharp's motion to strike Gold's response to her motion for reconsideration.

         II. Legal Standard

         A. District Court's Appellate Jurisdiction over ...


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