MU WON and HYE WON

Dated: June 5, 2019 ! Dene (0. 2 Daniel P. Collins, Bankruptcy Judge — 3 — 4 UNITED STATES BANKRUPTCY COURT 5 DISTRICT OF ARIZONA 6 || In re ) Chapter 7 Proceedings 7 WON and HYE WON , Case No: 3:17-bk-01600-DPC 8 Debtors. ORDER RE HOMESTEAD 9 ) PROCEEDS 10 [NOT FOR PUBLICATION] 11 $ 12 This matter came before the Court on June 4, 2019, at 10:00 a.m. for an evidentiary 13 || hearing on the Motion (““Motion’’) to Compel Turnover of Estate Property (Admin. Dkt. 14 □□ □□□ 53) filed by the chapter 7 trustee, Lawrence J. Warfield (“Trustee”). The Trustee 15 || appeared through counsel. Despite notice provided to them, Mu Won and Hye Won 16 || (“Debtors”) failed to appear at the June 4 trial. Debtors are unrepresented. 17 The Court has considered the Motion, the response filed by the Debtors at Admin. 18 |] Dkt. No. 55 (wherein the Debtors acknowledged having spent $50,000 of the proceeds 19 |! from the sale of this exempt homestead on the purchase of a mobile home), and the 20 || Trustee’s reply at Admin. Dkt. No. 57 along with the exhibits offered by the Trustee and 21 |/admitted into evidence at the June 4 trial. The Court has also considered the oral 22 || arguments of Trustee’s counsel. !? 23 The Trustee contends, that where proceeds from the sale of an exempt homestead 24 || are co-mingled with other funds, the Debtors lose their homestead exemption on all such 23 This ruling (the “Order”) constitutes this Court’s findings of fact and conclusions of law pursuant to Rule 7052 of 26 This Court has vuriediction this matter pursuant to 28 U.S.C. § 157 (b)(2)(B). 1 sale proceeds. The Trustee cites In re Flatt, 2018 WL 5807078 (D.Ariz. 2018), In re 2 Foreacre, 358 B.R. 384 (Bankr. D.Ariz. 2006), and In re Hassett, 2:14-bk-12106-BKM, 3 for this proposition. A closer reading of these cases reveals, however, that in Flatt and 4 Hassett, the debtors not only co-mingled their homestead sales proceeds, they also spent 5 all of their homestead sale proceeds on non-homestead purchases. The debtors in 6 Foreacre so completely co-mingled and jumbled their homestead sale proceeds with other 7 account funds that the court could not ascertain what remaining funds, if any, were 8 traceable to the homestead sale proceeds. More applicable to this case is In re Smith, 515 9 B.R. 755 (Bankr. D.Ariz. 2014) where this Court distinguished between homestead sale 10 proceeds spent on acquiring a new homestead and expenditures made unrelated to 11 acquiring a new homestead. The former were found exempt, the latter were not. 12 The Court now finds that on December 14, 2018, net homestead proceeds of 13 $73,709.15 from the sale of the Debtors’ homesteaded real property commonly known as 14 11638 E. Park Lane, Parks, AZ (the “Property”) were deposited in Debtors’ Chase Bank 15 account which then contained non-homestead proceeds. $50,000 of the homestead 16 proceeds were admittedly spent by the Debtors but they failed to supply any evidence that 17 the $50,000 was spent on acquiring a new homestead property. Chase Bank statements 18 admitted at trial demonstrate that, at least through January 22, 2019, an additional $8,368 19 was spent by Debtors from their Chase account in which the homestead proceeds were co20 mingled. Although there were funds in the Chase account before Debtors deposited their 21 homestead proceeds and Debtors thereafter deposited additional funds in the co-mingled 22 Chase account, this Court finds that all debits to this account after the deposit of the 23 homestead proceeds must be subtracted from the homestead proceeds. Accordingly, the 24 Court finds $58,368 of the $73,709.15 in homestead proceeds were spent on items other 25 than acquiring a new homestead. 1 Based on the above and being mindful that courts are to liberally construe 2 exemption issues in favor of the Debtors,3 the Court now hereby 3 ORDERS that the homestead exemption asserted by the Debtors in the sale 4 proceeds from the sale of the Property has lapsed to the extent of $58,368 and the sum of 5 $58,368 is no longer exempt. Within 30 days of this Order, the Debtors shall turn over to 6 the Trustee the sum of $58,368 as such amount constitutes non-exempt property of this 7 bankruptcy estate. 8 DATED AND SIGNED ABOVE. — 9 — — 10 — — 11 — — 12 — — 13 — — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 —