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Ninth Circuit BAP Provides Clarification on What Constitutes a Temporary Absence From a Homestead Property

On Behalf of | Aug 23, 2022 | Bankruptcy Appellate Panel

In In re Jaswinder Singh Bhangoo, BAP No. EC-21-1158-BSL, the United States Bankruptcy Appellate Panel of the Ninth Circuit (the “BAP”) affirmed a ruling from the United States Bankruptcy Court for the Eastern District of California that denied a debtor’s claimed homestead exemption. The BAP’s decision clarified the issues of when an absence is deemed “temporary” under California law and what constitutes an intent to return when claiming an automatic homestead exemption.

In Bhangoo, the debtor filed for a chapter 7 bankruptcy and claimed a $300,000 homestead exemption under California Code of Civil Procedure § 704.730 on a real property that he owned (the “Wild Rogue Property”). However, the debtor had moved out of the Wild Rogue Property and into a rented home over two years prior to filing his bankruptcy case. After moving out of the Wild Rogue Property, the debtor rented it to third parties. Creditors objected to the claimed homestead exemption on the grounds that the homestead exemption was inapplicable because the debtor did not reside at the Wild Rogue Property on the petition date. In response, the debtor argued that his absence from the Wild Rogue Property was only temporary and that he intended to return as evidenced by the fact that he kept his driver’s license address at the Wild Rogue Property. The lower bankruptcy court found in favor of the creditors, holding that the debtor did not meet the continuous residency requirement for a homestead. The debtor appealed.

The BAP affirmed the findings of the lower court. In doing so, the BAP held that the factors that a court must consider in determining residency for homestead purposes are (1) the debtor’s physical occupancy of the property on the petition date and (2) the debtor’s intent to live there. While the BAP acknowledged that a temporary absence doctrine exists, a debtor temporarily absent from his principal dwelling can only claim a homestead exemption if the debtor can establish an intent to return to the principal dwelling after the absence. The BAP held that this intent to return can only be established if: (1) the debtor intended to maintain the property as the debtor’s principal dwelling throughout the absence; and (2) the debtor demonstrated, rather than merely claimed, their intent to return to their home after such absence. Based on the foregoing, the BAP found that the debtor maintaining his driver’s license address as the Wild Rogue Property was insufficient to demonstrate the two elements required to establish an intent to return.

This case helps clarify that an absent debtor must show a continuous intent to return to the homestead property to claim an exemption. As stated by the BAP, “what matters is the debtor’s intent, and the debtor’s conduct with respect to the homestead is a manifestation of that intent which the court must consider.”