In re: MICHELE LYNN MCKEE,
An unmarried domestic partner faces obstacles in claiming a homestead exemption, a BAP opinion shows.
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- Case Type:
- Case Status:
- BAP No. CC-22-1042-GTS; Bk. No. 6:21-bk-10679-SY (9th Circuit, Nov 18,2022) Not Published
- This decision has no precedential value. The BAP affirmed the Bankruptcy court's holding that the Debtor could not claim the California automatic homestead exemption on property she did not physically occupy or have an intent to return to as of the petition date.
- Procedural context:
- Debtor owned a partial interest in a home (the "Property") with her partner. The Debtor and her partner separated, with the Debtor moving and changing her address to a rented property. As a result, the Debtor and her former partner entered into an agreement (the "Agreement") to dissolve their interests by selling the Property and dividing the proceeds. Prior to the sale, the Debtor allegedly failed to meet one of the conditions of the Agreement that would cause her to forfeit her interest in the Property. On her Chapter 7 petition, Debtor listed an interest in the Property on her schedules and claimed a homestead exemption under California Code of Civil Procedure ("CCP") § 704.730. Debtor's former partner objected to the homestead exemption, arguing that the Property was not property of the estate because the Debtor forfeited her interest in the Property pursuant to the Agreement and admitted that she had not lived at the Property for more than two years prior. The Trustee also objected, arguing that the Property was property of the estate but that the Debtor could not claim the homestead exemption because she did not live there. The Debtor responded that she continued to have an interest in the Property because she did not breach the Agreement that dissolved her interest and that CCP § 704.720(d) entitles a debtor who no longer resides in a homestead to retain the exemption when a "separated or former spouse continues to reside in or exercise control over possession of the homestead." The Debtor also argued that she could not be said to have abandoned her interest in the Property because she left involuntarily due to relationship abuse and intimidation. At the hearing for these objections, the Debtor testified that she had no intent to abandon the Property and made efforts to obtain her interest in the Property from the sale that she believed her former partner was delaying. The court determined that although the Debtor had the intent to retain her monetary interest in the Property, she could not claim the homestead exemption because she did not intend to reside at the Property and CCP § 704.730 did not apply because the Debtor and her former partner were not married.
- California law requires a debtor claiming the automatic homestead exemption to prove the debtor's entitlement to that exemption. To prove the debtor is entitled to the homestead exemption, the court considers "the debtor's physical occupancy of the property and the intent to reside there," although "a debtor who does not physically occupy the property on the petition date is not necessarily precluded." A physically absent debtor must show intent to return to the property after the absence. California courts have generally been lenient to debtors forced to leave for general safety concerns; however, the debtor must still demonstrate an intent to return to the property with the intent to reside there. While the Debtor contends that she would return to the Property if it were safe to do so, the court found that other objective factors about the Debtor's intent, such as the Agreement and email exchanges between the parties, demonstrated that the Debtor only intended to seek payment of her interest from the Property rather than return. In addition, the Debtor changed her address on her driver's license and voting registration, relinquished her keys, and ceased paying for upkeep on the Property such as mortgage, maintenance, taxes, and other expenses. Accordingly, the BAP found that the bankruptcy court's view of the evidence was not clear error. Further, CCP § 704.720(d) is inapplicable to non-married debtors because the terms of the statute refer to "spouse" and "community property," none of which was present in this case. Judge Taylor concurred to note that the objective factors, such as changing addresses, used to determine whether a physically absent debtor has abandoned a homestead due to abuse and and intimidation should be considered more leniently to make it easier for a debtor fleeing an unsafe situation to show intent to return.
- GAN, TAYLOR, and SPRAKER