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The District Court for the Southern District of Florida, in the case of Carpenter v. Brown, 13-CV-61183-KMM (SD Fla. 2013), addressed the issue of whether the placing of a property on the market for sale or the entering into a sales contract constitutes the abandonment of the homestead exemption.    In this case, the debtor closed on a contract for the sale of his property eight days after filing for chapter 7 relief.  In the case, the District Court upheld the Bankruptcy Court's disallowance of the exemption of the real property as a homestead as it found that the debtor did not have the intent to remain permanently in the property on the date the bankruptcy case was filed.

Article X, section 4 (a)(1) of the Florida Constitution provides for the homestead exemption. The Court explained that the definition of a "homestead" is liberally construed to protect homeowners. In re: Brown, 165 B.R. 512, 514 (Bankr. MD Fla. 1994).  But the Court noted, that at the same time, the Court must "take care to prevent it from being an instrument of fraud."  Once a property is established as a homestead it does not lose that status until it is "abandoned".  The Court explained that a "homestead has been abandoned when it is no longer a 'bona fide' home and place of permanent residence."  The Court noted that the main consideration in the determination of whether a homestead has been abandoned is the "owner's intent" and the physical absence from the property is "not determinative." 
In this case, the District Court, which was acting in its appeals capacity of the Bankruptcy Court's decision, upheld the Bankruptcy Court's finding that the debtor failed to satisfy the "intent prong" of the homestead exemption. The Bankruptcy Court found that the debtor did not possess the requisite intent to live permanently at the property on the date of the filing of the bankruptcy case and that he had therefor abandoned the property as being his homestead. 
The District Court rejected the debtor's argument that despite the contract for the sale of the property, the homestead was still intact as he still lived there.  The District Court cited a prior rulings in other cases which held that the placing of property on the market for sale or lease may constitute the abandonment of the intent to use and occupy the property as a permanent place of residence. The property would no longer qualify for the homestead exemption unless the debtor had the intent or ability to use the proceeds to establish a new homestead. Smith v. Hamilton, 428 So. 2d 382, 384 (Fla. Dist. Ct. Appl. 1983). 
In this case, the District Court stated that the debtor did not display an intention to reinvest the sales proceeds in a new homestead. The debtor noted that the spent a portion of the sales proceeds on moving expenses and moved to Massachusetts.  The Court reviewed that the sales proceeds of a sale of a homestead are only exempt if "the seller shows by a preponderance of the evidence an abiding good faith intention prior to and at the time of the sale of the homestead to reinvest the proceeds in another homestead within a reasonable time." Orange Brevard Plumbing & Heating Co. v. La Croix, 137 So. 201, 206 (Fla. 1962). The Court noted that here is was undisputed that the debtor did not have the intention to reinvest the proceeds in another homestead. 
if the property is not exempt as a homestead, the sales proceeds(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases.

William Barry Blythe, 67, of Murrieta, California is charged with one count of bankruptcy fraud and submitting a false tax return.  Blythe carried out a homeowner scheme that included creating multiple fake trust accounts that claimed to hold the title of homeowner properties.  In doing so, he claimed to take ownership of the mortgages but […]

Recent good news for families contemplating filing Chapter 7 Bankruptcy in Fresno and throughout California!  Beginning April 1, 2014, more families in California will be able to get a fresh start by filing a Chapter 7 bankruptcy.

One obstacle to filing a Chapter 7 bankruptcy case is the "means test".  Most individuals whose debts are consumer debt (not business debt) have to "pass" the bankruptcy means test.  The bankruptcy "means test" determines whether your income is low enough for you to file Chapter 7 bankruptcy. It is a "test" designed to keep debtors with higher disposable incomes from filing for Chapter 7 bankruptcy. High income filers who fail the means test may use Chapter 13 bankruptcy -- a chapter in bankruptcy that requires debtors to repay a portion of their debts.  

The amount a household earns is just one factor.  A family that does not make much money will surely pass the means test.  However, households that have good paying jobs can also pass the test.  The size of the household and the amount of monthly recurring expenses play an important role as well.  A family of 7 can have yearly income exceeding $100,000 and still qualify under the means test.  Having a lot of expenses, such as paying child support, making a large house mortgage, or having a car payment can help pass the means test.  Here is a simple analysis to determine if your household can pass the means test:

Step One: Is Your Income More Than the Median?Below is the newest median yearly income for a households in California:   

This median yearly income chart just became effective last week.  It was released by the Justice Department. The Justice Department changes the thresholds approximately twice per year.  It last changed in November of 2013.  The changes resulted in fewer families qualifying for Chapter 7 bankruptcy.  I wrote about the changes in a a blog article last November.  If you are reading this article after October of 2014, there is a good chance this information is no longer good.  Click the link to find the most up to date information.  

First, identify how people are in your household.  If you are single, current maximum household income is $48,498.  If there are 4 people in you household, the amount you are allowed to make is $76,211.  If you have more than 4, add $8,100 for each household member.  

If your household income is less than the chart states, you pass. Period. You're done. You do not need to complete the rest of the means test. You can file for Chapter 7.  No need to do the the second step analysis. 

Step Two: Analyze Monthly Expenses
For those whose household income exceeds the state median, the means test computations get significantly more complex. You can still pass the means test, but it will require detailed analysis of your household's monthly expenses.  You must determine whether you have enough income left over (called "disposable income"), after paying your "allowed" monthly expenses, to pay off at least a portion of your unsecured debts (such as credit card bills). If your disposable income adds up to more than a certain amount, you fail the means test and cannot file for Chapter 7 bankruptcy.  You may be required to file for Chapter 13 bankruptcy.

Attorney Ken Jorgensen is located in Clovis, California.  He handles personal, property and business disputes, including bankruptcy and eviction cases.  You can find out more about Ken on Facebook, or at his websites, www.fresnolawgroup.com and www.fresnobankruptcylawgroup.com.  He can be reached at [email protected] or by telephone at 1-559-324-1882.
Photo Credit: "happy puppy" by Robert Couse Baker at Flickr

Homeowners very often wind up filing for bankruptcy. Before filing, homeowners wonder whether or not they will be able to keep their house through the bankruptcy process. For most homeowners, there is not sufficient equity in the property which would cause them to lose the property. In other words, the property has no administrative value+ Read MoreThe post Filing Bankruptcy And Protecting Your Home appeared first on David M. Siegel.