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When a House is Not a Home

September 4, 2015

Recently, a New Jersey bankruptcy court reminded us that home is where you hang your hat. But what makes a house a home will vary between bankruptcy courts. The case was In re Abraham, 2014 WL 3377370 (Bankr. D.N.J. July 10, 2014), a Chapter 7 case involving a claim under the federal homestead exemption.

The facts in this case are a little unusual, but not all that uncommon. The married debtors moved to Tehran, Iran from New Jersey in 2011, after the husband’s business income started to decline. The couple’s adult children continued to occupy the debtor’s New Jersey home, making payments for the mortgage, utilities, and the general maintenance of the property. In 2012, the debtors filed for Chapter 7 bankruptcy protection in New Jersey, and claimed a federal homestead exemption of $43,250. The Chapter 7 bankruptcy trustee objected and argued that the property did not qualify as the debtor’s “residence” under Section 522(d)(1) of the Bankruptcy Code. The debtors maintained that the New Jersey property was their residence. They claimed their intent to return to New Jersey in the future. The husband offered his New Jersey driver’s license as proof of residency during a section 341 meeting of creditors.

Section 522(d)(1) specifically provides that under the federal exemption scheme, equity in a residence may be exempted up to $22,975 for a single debtor or $45,950 for joint debtors. However, the Bankruptcy Code does not define the term “residence.” Consequently, courts have determined the meaning of “residence” by applying either a “plain meaning approach” or a “‘residence’ as ‘homestead’ approach.”

A minority of courts us the plain meaning approach. Under this approach, “residence” is applied expansively as a “place where one actually lives.” The plain meaning approach allows for multiple residences, or a place the debtor occupies for a period of time.

The majority of bankruptcy courts use the “’residence’ as homestead’ approach,” which defines “residence” the same way the debtor’s state law defines the term. The bankruptcy court in Abraham chose to apply the majority view, and concluded that the New Jersey property did not functionally serve as the debtors’ residence. The debtors did not occupy the property and the court found that the debtors did not intend to return to the property. Therefore, the debtors could not apply a homestead exemption to their New Jersey property.

If you own property in several states and intend to file bankruptcy, speak with an experienced bankruptcy attorney. How the court in your jurisdiction defines “residence” may mean the difference between keeping and losing property.

If you are considering filing for bankruptcy please call the experienced attorneys at Fears Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to

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