Justices Decline to Hear Case on ‘Vanishing’ Homestead Exemption

The U.S. Supreme Court declined to consider whether state exemptions that protect a bankrupt debtor’s home equity vanish during the course of a bankruptcy if the debtor sells the home and doesn’t reinvest the proceeds in a certain amount of time.

The justices’ Feb. 22 order leaves intact a ruling from the U.S. Court of Appeals for the First Circuit, which held in July 2020 that bankruptcy law’s complete snapshot rule applies to state homestead exemptions.

That rule, which says a debtor’s rights and obligations are frozen as of the date of a bankruptcy filing, means that a homestead exemption ...