Court Protects Homestead Property Used For Debtor's Commercial Business
Homestead protection applies to homes and land occupied by a debtor as his primary residence. Property used for commercial purposes or for the production of income generally does not qualify for homestead protection. A Florida bankruptcy court recently considered married joint debtors who used part of a homestead property for his residence and part of the same property for business and income production. The issue was whether the partial business use disqualified all or part of the debtors' homestead protection from their judgment creditors. The two debtors owned a five acre parcel of land in the county. They built their residence on a minority portion of the land. The debtors had two more buildings on the same land. One building was a warehouse used exclusively for the debtors' business. The third building was a second residence rented to an unrelated third party. In other words, two of the three structures occupying most of the property were used commercially.
The bankruptcy court held that the entire land and all three structures were protected from the debtors' creditors in his bankruptcy proceeding and were not subject to administration as part of the bankruptcy estate pursuant to the homestead exemption.. The court found that the Constitutional homestead clause does not disqualify a homestead because the owner uses the property commercially or for the production of rental income. The court said that, the "Debtors' commercial use of the Building (rental) and the Warehouse does not preculd them from claiming the entirety of the Real Property as exempt." The court recognized that other bankruptcy courts reached opposite conclusions in earlier cases. The case is: In re: Earnest, Case No. 08-4408-3F7.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
RE: Court Protects Homestead Property Used For Debtor's Commercial Business
I am in a situation similar to this, but not in bankruptcy. I have a judgment against me on the home I have been living in. I have another four acre parcel with a rental house and a barn. Because I am losing the first house in foreclosure and the four acre parcel is free and clear, I have chosen to claim and occupy the four acre parcel as my homestead. The house on the four acres was rented when my problems started. I advised the tenants that they would have to leave, but in the meantime, I have occupied a finaished room/office in the barn. It is air conditioned, has a ceramic tile floor and an adjacent full bath with shower plus an adjacent room with a refrigerator and laundry facilities. The tenants have left, I have put the electric in my name and am moving into the house. Last week, I stopped a sale of the property by claiming homestead. The creditor is claiming fraud and has set a hearing for another sale date. Is there any reason that I cannot claim homestead? I am no longer claiming homestead on the house we are losing in foreclosure. What law supports my case?