Debtor May Still Claim Homestead Exemption Even If He Was Kicked Out

Friday, July 1, 2016

The bankruptcy court for the Eastern District of New York found that a debtor who was ordered to vacate his home could still claim an exemption in the property. In a divorce proceeding several months prior to the bankruptcy filing, the debtor’s spouse had been granted exclusive occupancy of the home and the debtor was barred from entering the property. At the time of the bankruptcy filing, the debtor was prohibited by the state court order from residing at the property.
The chapter 7 trustee objected to the debtor’s homestead exemption and argued that because the debtor’s voter registration, driver’s license, tax returns and bankruptcy petition listed a different address, the debtor could not claim the homestead exemption. The bankruptcy court found that the state court order did not prevent the debtor from claiming a homestead exemption because the debtor had intended to occupy the property and was forced to leave by the state court order. The bankruptcy court also noted that the debtor’s failure to change his address was not sufficient to “undercut the Debtor’s claim of homestead exemption.” 

In reaching its conclusion, the bankruptcy court gave weight to the debtor’s intent and his testimony that he considered the property his principal residence. The bankruptcy court stated that “the record reflects that, as is typical in a marriage, the Debtor considered [the marital property], where he resided with his spouse, and which they owned together, to be his principal residence, and only left the [martial property] when forced to do so by the [divorce occupancy order].” (In re Denker-Youngs, Case No. 15-41069 (Bankr. E.D.N.Y June 2, 2016))

Bodie B. Colwell practices as an associate with Preti Flaherty's Bankruptcy, Creditors’ Rights and Business Restructuring group from the Portland office. She focuses on supporting bankruptcy, insolvency, and creditors’ rights clients.

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