in re Larsen

Case Type:
Case Status:
Reversed and Remanded
Ninth Circuit Bankruptcy Appellate Panel Case No. NV-20-1133-FBG (9th Circuit, Nov 03,2020) Not Published
The Bankruptcy Appellate Panel determined that the Trustee's objection was correct; however, not for the reasons presented by the Trustee. The Debtors were not entitled to any Nevada exemption because they were domiciled in Washington. The Panel noted that the Debtors, upon remand, could amend their scheduled exemptions under Washington law; and, the Trustee, if he elected to do so could object to the new exemptions on any appropriate basis. Thus, the bankruptcy court erred in overruling the Trustee's objection; however, the matter was remanded for further proceedings regarding the property.
Procedural context:
The Chapter 7 Trustee filed an objection to the Debtors' claimed Nevada exemption in real property located in the State of Washington primarily on the basis that the Debtors did not reside in the real property. The bankruptcy court overruled the Trustee's objection to the Debtors' homestead exemption, finding that the Debtors intended to return to their home in Washington. The bankruptcy court reasoned that the Debtors should not be denied a homestead exemption merely because the family was away due to military service assignment. The Chapter 7 Trustee appealed the bankruptcy court's ruling to the Ninth Circuit Bankruptcy Appellate Panel.
Mrs. Larsen owned a parcel of real property in the State of Washington as her separate property (Washington Property) since 2003. Mr. and Mrs. Larsen (Debtors) resided in the Washington Property until the later part of 2014. Mr. Larsen had served in the U.S. Navy for 25 years, and, in the later part of 2014 was stationed in Guam. In the later part of 2017, Mr. Larsen was transferred to a station in Nevada. During the time of Mr. Larsen's respective assignments, the Debtors moved to the location of the respective assignment. Thus, the Debtors had not lived in Washington for approximately 6 years. While the Debtors resided in Nevada they filed for relief under Chapter 7. The Debtors filed in Nevada as they resided in Nevada the majority of the 180 day prior to petitioning for relief. Utilizing the Nevada State law exemptions, the Debtors asserted that the Washington Property was exempt as a homestead. The basis in support of this assertion was that the Debtors intended on returning to the Washington Property. The Trustee objected to the exemption arguing that Debtors must actually reside in the property (on the petition date, a family member was residing in the Washington Property); and, the Nevada State law exemptions only protected real property in Nevada. As noted in the Bankruptcy Appellate Panel's Memorandum, during the course of this matter, the Debtors had moved back into the Washington Property in June 2020 upon completion of Mr. Larsen's service.
Honorable Faris, Brand, and Gan, Bankruptcy Judges

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