The Bankruptcy Appellate Panel (BAP) for the Ninth Circuit vacated the ruling of a bankruptcy judge, finding that the debtor in a Chapter 7 case might be entitled to exempt certain real property as his homestead. In re Calderon, 507 B.R. 724 (BAP 9th Cir. 2014) (PDF file). The bankruptcy court sustained the trustee’s objection to the debtor’s claimed exemption because the debtor did not live at that property. The federal Bankruptcy Code includes provisions for property exemptions but allows states to apply their own exemptions. In California, for example, state law governs exemptions in all personal bankruptcy cases. The BAP found in Calderon that the laws of the debtor’s state, Arizona, applied to his case, and that Arizona law allows the exemption of a homestead where a debtor does not live under certain circumstances.
The debtor and his wife purchased the residence at issue in 2002. They both lived there until they divorced in March 2011. The debtor became the sole owner of the residence under the terms of their divorce settlement, but he moved out shortly after the divorce was finalized. He moved into a rental house and kept all of his belongings with him there. He leased the residence to a couple with a one-year lease that began on May 1, 2012 and expired April 30, 2013, with an option to renew.
In July 2012, the debtor filed for Chapter 7 bankruptcy. He initially used the rental home as his home address and identified the residence as rental property. In September 2012, he filed an amended Schedule C that claimed a homestead exemption in the residence under Arizona law. A.R.S. § 33-1101(A). He claimed the residence was worth about $300,000 and that he had about $84,000 in equity. Continue reading