In Diaz v. Kosmata (In re Diaz), BAP No. CC-15-1219, the 9th Circuit Bankruptcy Appellate Panel (the “BAP”) reversed the Central District bankruptcy court’s allowance of a homestead exemption for a disabled debtor, holding that the bankruptcy court erred in failing to consider the debtor’s intent to reside in the subject property.
California Code of Civil Procedure Section 704.710(c) includes a “continuous residency” requirement in order for a debtor (or the debtor’s spouse) to claim a homestead exemption in a property. In this case, the debtor did not physically reside in the subject property. However, the BAP explained that physical occupancy on the petition date is neither a necessary nor sufficient condition of residency, but that the debtor must have the intention to reside there. Since the record from the bankruptcy court did not sufficiently develop the issue of the debtor’s intent to make the property his residence, the BAP vacated the order sustaining the Trustee’s motion for disallowance of the homestead and remanded for further proceedings regarding the debtor’s intent.