IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 19-20419

Summary Calendar

IN THE MATTER OF: MINH VAN TRUONG; LE THI LE,

 Debtors

TAN PHAN, 

 Appellant

v.

MINH VAN TRUONG; LE THI LE, 

 Appellees

Appeal from the United States District Court 

for the Southern District of Texas

USDC No. 4:17-CV-3318

Before DAVIS, SMITH, and HIGGINSON, Circuit Judges.

PER CURIAM:*

Tan Phan appeals the district court’s order affirming the bankruptcy 

court’s judgment overruling Phan’s objection to the Debtors’ claim of exemption 

 

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

October 21, 2019

Lyle W. Cayce

Clerk

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No. 19-20419

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in real property. Concluding that the district court did not err in affirming the 

bankruptcy court’s judgment, we AFFIRM.

I. Background

On June 9, 2017, Debtors, Minh Van Truong and Le Thi Le, filed a 

voluntary petition for relief under Chapter 7 of the Bankruptcy Code. In their 

petition, the Debtors indicated that their only creditor was Phan; that his claim 

was unsecured; and that Phan had obtained a judgment against them in state 

court in the amount of $148,142. In the Schedule C form attached to their 

petition, the Debtors asserted that their homestead was an exempt asset under 

Texas law and should not be included in the bankruptcy estate. The

bankruptcy court agreed that the Debtors’ homestead was an exempt asset and

discharged the bankruptcy case as a no-asset estate. 

Phan thereafter filed an objection in the bankruptcy court arguing that 

the Debtors’ homestead was not exempt from his claim because under Texas 

law, there are certain exceptions to the homestead exemption. Specifically, 

Phan relied on Section 41.001 of the Texas Property Code which provides that 

homesteads “are exempt from seizure for the claims of creditors except for 

encumbrances properly fixed on homestead property.” That section further 

provides that “encumbrances may be properly fixed on homestead property for 

(1) purchase money; . . .[or] . . . (5) the refinance of a lien against a homestead 

. . . .”

Phan asserted that because he loaned the Debtors the funds to pay off 

their mortgage and/or refinance the mortgage on their homestead in 2009, the 

homestead is a nonexempt asset which must be liquidated under Chapter 7. 

Phan attached a copy of a final judgment rendered by a state district court on 

April 25, 2017, in his favor and against the Debtors “on his claim for breach of 

contract.” The judgment awarded Phan $127,294 in damages, $20,122 in 

attorney’s fees, and $726 in costs.

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In response to Phan’s objection, the Debtors admitted that a judgment 

was rendered in Phan’s favor and against them for breach of contract by a 

Texas district court. They denied the existence of any loan documents, either 

for purchase money or refinancing funds, executed by them and Phan. They

further denied that they created any security interest, or extended any security 

interest to Phan, in their homestead. 

The bankruptcy court noted that the state court judgment did not award 

Phan an interest in the homestead and that Phan presented no evidence of a 

deed conveying the property to him. The bankruptcy court further noted that 

Phan provided no abstract of judgment filed in the real property records of 

Harris County, Texas. Because Phan’s interest was unrecorded, the 

bankruptcy court determined that Phan’s claim was “wholly unsecured” and 

that the Debtors were able to “avoid Phan’s unrecorded interest.” The 

bankruptcy court, therefore, overruled Phan’s objection. The district court 

affirmed.

On appeal, Phan asserts that under Texas Property Code § 41.001, he 

was not required to produce a written agreement or contract in order for his 

claim to be enforceable against the Debtors’ homestead. He asserts that the 

district court’s judgment should be reversed because the Debtors’ homestead 

is a nonexempt asset which must be liquidated under Chapter 7 of the 

Bankruptcy Code to pay for the judgment he obtained against the Debtors.

II. Discussion

This court reviews “the decision of a district court sitting as an appellate 

court in a bankruptcy case by applying the same standards of review to the 

bankruptcy court’s findings of fact and conclusions of law as applied by the 

district court.”1 “Acting as a second review court,” this court reviews a 

 

1 Viegelahn v. Lopez (In re Lopez), 897 F.3d 663, 668 (5th Cir. 2018).

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bankruptcy court’s legal conclusions de novo and its findings of fact for clear 

error.2

Upon filing a petition for bankruptcy, a debtor may remove certain 

property from the bankruptcy estate under federal or state law, thereby 

shielding the property from creditors.3 A debtor must file a list of this “exempt” 

property and “[u]nless a party in interest objects, the property claimed as 

exempt on such list is exempt.”4 Under Texas law, homesteads are eligible for 

exemption from the bankruptcy estate. The Texas Property Code allows a 

home to be “exempt from seizure for the claims of creditors except for 

encumbrances properly fixed on homestead property.”5 The Code further 

provides that “[e]ncumbrances may be properly fixed on homestead property 

for (1) purchase money; . . . [or] . . . (5) the refinance of a lien against a 

homestead, . . . .” Texas law caps the homestead exemption in size, but not in 

value.6

Phan reasserts his argument that the Debtors’ homestead is not exempt 

from his claim because the debt owed to him falls within an exception to 

Texas’s homestead exemption law. Specifically, he asserts that the debt owed 

to him represents funds used in 2009 to pay off the mortgage on the Debtors’ 

house. He contends that Texas law does not allow the Debtors’ homestead to 

be shielded from his claim because the debt owed to him is a “judgment debt 

from the refinance of a lien against debtors’ homestead.” He further maintains 

the exceptions to the homestead exemption relating to purchase money and 

refinancing of a lien do not require a written agreement.

 

2 Id. (citations omitted).

3 11 U.S.C. § 522(b).

4 Id. § 522(l).

5 TEX. PROP. CODE § 41.001(a) (emphasis added).- 6 See id. § 41.002 (limiting “urban” homestead to “not more than 10 acres of land which 

may be in one or more contiguous lots”).

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Phan is correct that Texas law provides for exceptions to the homestead 

exemption, but he is mistaken that the money judgment he obtained against 

the Debtors in state court falls within one of those exceptions. In asserting his 

argument, Phan fails to recognize that to constitute an exception to Texas’s 

homestead exemption, his claim must involve an encumbrance properly fixed 

on the Debtors’ homestead property.7 Black’s Law Dictionary defines the word 

“encumbrance” as: “A claim or liability that is attached to property or some 

other right and that may lessen its value, such as a lien or mortgage; any 

property right that is not an ownership interest.”8 

Although Phan used his funds to pay off the mortgage on the Debtors’ 

property (which would have been an “encumbrance properly fixed on 

homestead property” under § 41.001), he did not obtain an encumbrance on the 

property in the form of another mortgage or lien at that time. Phan also did 

not obtain a transfer of any mortgage or lien he alleges he helped the Debtors 

“refinance” at that time. The money judgment awarding Phan damages, 

attorneys’ fees, and costs for the Debtors’ breach of contract is not an 

“encumbrance properly fixed on homestead property.” 

Based on the foregoing, the bankruptcy court properly overruled Phan’s 

objection to the Debtors’ claim of homestead exemption. Accordingly, the 

district court’s judgment affirming the bankruptcy court’s judgment is 

AFFIRMED.

 

7 TEX. PROP. CODE § 41.001(a)

8 Encumbrance, BLACK’S LAW DICTIONARY (11th ed. 2019).

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