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Definition of "Residence" for Claiming North Carolina's Homestead Exemption

Published April 10, 2014 by Sasser Law Firm

What is your residence? For most individuals, answering that question probably takes little thought. It can be an extremely important question, though, for someone who holds equity in property when filing a bankruptcy case.

An individual person, as opposed to a corporation, has the opportunity to claim exemptions when filing a bankruptcy case. Claiming an exemption is a legal way of designating and protecting certain amounts of equity in property as beyond the reach of a creditor or bankruptcy trustee.

Exemptions are provided under federal or state law. Most individuals filing a bankruptcy case in North Carolina, such as in the Raleigh area where Sasser Law Firm is located, will find it to their benefit to claim the exemptions allowed by North Carolina law. North Carolina’s homestead exemption is found at N.C. General Statute § 1C-1601(a)(1), and 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.”

Two recent bankruptcy cases from the Eastern District of North Carolina interpret the definition of “residence” for exemption purposes. The cases are 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 bankruptcy trustee objected to the debtor’s homestead exemption on the basis that the property claimed did not qualify as the debtor’s “residence.”

In the Davila case, the court considered whether property located in Mexico occupied by the debtor’s brother qualified for the debtor’s homestead exemption. The debtor testified that though she and her husband lived during their marriage in North Carolina, they always intended to live on the property in Mexico and that since her divorce, she intended to move to the property in Mexico. In the Whitney case, the court considered property that was inherited from the debtor’s mother. The property was close to where the debtor and her husband had their modular home. The debtor lived at the property about ten days out of a month and intended to live there permanently once maintenance issues at the property were resolved.

The bankruptcy court overruled the trustee’s objection in each case and allowed the debtor’s homestead exemption as claimed. The court found it relevant that each debtor paid the property taxes, kept a bed and other personal items at the property, and expressed a definite intention to live at the property in the not too distant future.

A copy of 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), can be found attached to this post.

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