Court Defines “Residence” Generously for Exemption Purposes

Posted by NCBRC - February 17, 2014

In two cases out of North Carolina, the bankruptcy court interpreted the state definition of “residence” for exemption purposes. In re Davila, No. 13-3246 (Bankr. E.D. N.C. Jan. 30, 2014) and In re Whitney, No. 13-05671 (Bankr. E.D. N.C. Jan. 15, 2014). In both cases, the debtor had title to the property, paid taxes, and kept personal items including a bed there. In Davila, the property was located in Mexico and was currently occupied by the debtor’s brother. She testified that, though she and her husband lived during their marriage in North Carolina, they always intended to live on the property and that since their divorce, she intended to move there herself. In Whitney, the property at issue was an inheritance from the debtor’s mother and was close to the property where the debtor and her husband had their modular home. The debtor lived on the property approximately ten days out of every month and intended to live there permanently once maintenance issues were resolved. In both cases, the trustee objected to the claimed exemption on the basis that the property did not qualify as a “residence.”

The court began with North Carolina’s homestead exemption, N.C. Gen. Stat. § 1C-1601(a)(1), which permits an exemption to be taken in “real property or personal property that the debtor or a dependent of the debtor . . . uses as a residence.” In finding that the property constituted the debtor’s residence, the court relied on its earlier decision in In re Foster, 348 B.R. 58, 60 (Bankr. E.D.N.C. Aug. 15, 2006) (home, made uninhabitable by hurricane, still qualifies for homestead exemption based on debtor’s intention to use as residence). In this case, the facts that the debtors paid taxes, kept a bed and other personal items there, and expressed a firm intention to live on the property, was sufficient to satisfy the state law definition of residence.

Davila opinion

Whitney opinion




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