Expanding upon its decision in Matter of Zibman, 268 F.3d 298 (5th Cir. 2001), the Fifth Circuit has ruled that the proceeds from sale of a Texas homestead lose their exempt character if they are not reinvested within six months--even when the sale takes place post-petition. Viegelahn v. Frost (In re Frost), No. 12-50811 (5th Cir. 3/5/14). The opinion can be found here
. The opinion creates a malpractice trap and arguably conflicts with this week's Supreme Court decision in Law v. Siegel. The ProblemThe Bankruptcy Code states that "property exempted under this section is not liable during or after the case for any debt of the debtor that arose . . . before the commencement of the case" except for debts for taxes and domestic support obligations, unavoided liens, debts owed by an institution-affiliated party and debts for fraud incurred in obtaining a student loan. 11 U.S.C. Sec. 523(c). Further, exempt property is not liable for administrative expenses except for the cost of recovering that property. 11 U.S.C. Sec.