May 26, 2016 Practice Points

Homestead Exemptions and Subdivisions

Actual use remains paramount in determining extent of homestead exemption

by Santiago Posas

One question faced by creditors of a consumer debtor in bankruptcy is how to reach what is often their most valuable asset, their home. The Bankruptcy Code and state laws provide exemptions for property—or for up to a certain value in that property—often making it impossible for creditors, especially unsecured creditors, to reach that real estate. However, in Nealon v. Matthews (In re Nealon), an unsecured creditor attempted a creative way to reach parts of the debtor’s real estate, where the debtor had previously begun—but not completed—a subdivision of his property. BAP NO. MW 15–035 2016 WL 312409, at *1 (1st Cir. B.A.P. Jan. 20, 2016). 

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