BANKRUPTCY LAW (Homestead Exemption): In a recent case, the federal Second District Court of Appeal (NY, NJ, Connecticut) held that any “residence” in which the debtor has an interest is eligible for application of the homestead exemption. The court adopted the “minority rule,” which holds that “residence” includes a non-primary residence (e.g., a vacation home, or a property in which a spouse or child lives), and thus federal, controls the application of the homestead exemption.
As a result, a debtor may seek to have the homestead apply to her non-primary residence, if the federal courts in that state have taken a position on the application of the federal defeinitions of “homestead” and “residence.”
Notably, California law allows a debtor to assert a homestead exemption as to property in which the debtor’s spouse or former spouse lives. Calif. Code of Civil Procedure Sec. 704.720(d).
The Maresca court said:
“When a debtor files for bankruptcy, she may “exempt” certain interests from her “estate,” thus removing them from the pool of assets available to satisfy her creditors. 11 U.S.C. § 522(b)(1); see also id. § 541(a)(1) (defining property of the estate to include “all legal or equitable interests of the debtor in property as of the commencement of the [bankruptcy] case”). With some exceptions not relevant here, a debtor may also “avoid the fixing of” judicial liens on encumbered property that would otherwise be subject to an exemption. Id. § 522(f)(1)(A); see Owen v. Owen, 500 U.S. 305, 311-13, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991).
“[T]he bankruptcy court adopted what it called the “minority ‘plain meaning’ approach,” [under] which the term “residence” is interpreted, using traditional canons of construction, to include primary and non-primary residences. See, e.g., In re Demeter, 478 B.R. 281, 286-92 (Bankr. E.D. Mich. 2012).
“[Para.] When a debtor files for bankruptcy, she may “exempt” certain interests from her “estate,” thus removing them from the pool of assets available to satisfy her creditors. 11 U.S.C. § 522(b)(1); see also id. § 541(a)(1) (defining property of the estate to include “all legal or equitable interests of the debtor in property as of the commencement of the [bankruptcy] case”). With some exceptions not relevant here, a debtor may also “avoid the fixing of” judicial liens on encumbered property that would otherwise be subject to an exemption. Id. § 522(f)(1)(A); see Owen v. Owen, 500 U.S. 305, 311-13, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991).
“[Para.] The federal exemption at issue in this case, referred to as the “homestead” exemption, allows the debtor to exempt—and thereby avoid a judicial lien upon—her “aggregate interest, not to exceed [$23,675] in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence.” Id. § 522(d)(1) & (f)(1)(A); see 4 Collier on Bankruptcy ¶ 522.09[1].”
In re Melissa Maresca, 982 F.3d 859 (2020)
Argued: October 22, 2020.
Decided: December 14, 2020
