When someone asks you where you reside, the answer is usually easy. But when someone asks you where you are domiciled, the answer might not be the same. A recent Massachusetts bankruptcy court decision determined that a debtor who claimed Massachusetts was only a temporary home could not use the Massachusetts homestead statute to protect property in Michigan where he was domiciled.
The debtor sought to shield from creditors approximately $30,000 in equity in the Michigan property. The Massachusetts homestead statute (subject to certain limitations) protects up to $500,000 in equity in a debtor’s residence. The Chapter 7 Trustee objected to the claimed exemption. He argued that at the creditor’s meeting, the debtor admitted that he had not occupied the Michigan property and had lived in Massachusetts for several years. Because he did not reside in the property, the Chapter 7 Trustee argued that the debtor could not use the exemption.
Debtor claimed that the property had been in the family for generations and is acquired it in 1988. He lived in the property for approximately 10 years until he moved to Massachusetts to take care of his ailing grandmother. He viewed the move to Massachusetts as temporary. While here, he continued to maintain the property and visited it once per year. He did not rent it out. In December, debtor’s grandmother died and he argued that he intended to return to the property.
Debtor argued that he could only use the Massachusetts homestead exemption because he resided in Massachusetts prior to filing. He argued that while the homestead statute does not expressly state whether a home must be located in Massachusetts in order for the statute to apply, he is entitled to use that exemption. He resided in Massachusetts when he recorded his homestead declaration. The Trustee then claimed that based on the debtor’s responses to his objections, the debtor resided in Michigan at the time of the filing, and therefore, the Debtor must choose between the federal or Michigan exemptions, not Massachusetts.
Residence v. Domicile: A Distinction with a Difference
Under the Bankruptcy Code, a debtor is allowed to keep certain assets away from creditors by invoking exemptions. The exemptions that a debtor is able to use is determined by Section 522(b)(3)(A) of the case which provides that the debtor may used exemptions under federal law or “State or local law that is applicable on the date of the filing of the petition at the place in which the debtor’s domicile has been locate3d for the 730 days immediately preceding the date of the filing of the petition.”
The Bankruptcy Court found that “domicile” and “residence” are not the same. Citing case law from the 9th Circuit, the Court noted that “A domicile is a residence coupled with an intent to remain….That a debtor may move to another jurisdiction does not change the debtor’s domicile unless the debtor intends to remain in the new jurisdiction.”
The Court found that the debtor never intended to acquire a new domicile in Massachusetts, and therefore he was required to either elect the federal exemptions (which provide for a homestead exemption of only $18,450) and to the extent allowed, the Michigan exemption statutes (which is between $30,000 and $45,000).
Related posts:
- The Sting of the Homestead Cap
- Leaving Home and Keeping the Homestead: A Look at Homestead Termination in Massachusetts
- Leaving Home and Keeping the Homestead: A Look at Homestead Termination in Massachusetts
- A Lesson in Exemptions
- Unauthorized Post Petition Transfer Leads to Denial of Discharge
Tags: Bankruptcy, Credit and Debt, Homes, homesteads and real estate