591 B.R. 829
Bankr. C.D. Ill.2018Background
- Debtor Heidi Colton and husband Jeff bought their Washington, Illinois home as joint owners in 2005; they separated in Aug. 2017 and Heidi moved into a leased duplex. She filed Chapter 7 on April 23, 2018.
- At the time of filing Jeff remained living in the Dogwood property; the Debtor retained title, remained liable on the mortgage, and received monthly child support from Jeff.
- The Debtor moved some furniture and clothing out but left personal property at the house; children sleep there periodically and attend the same school district.
- Debtor keeps a garage-opener and access with Jeff’s consent, cared for the property (mowed, pet care) while Jeff was away, and has not established a new homestead.
- Trustee objected to Debtor’s $15,000 Illinois homestead exemption on the ground that Debtor did not occupy the residence on the petition date.
Issues
| Issue | Plaintiff's Argument (Trustee) | Defendant's Argument (Colton) | Held |
|---|---|---|---|
| Whether Debtor’s homestead exemption is lost for lack of "occupied" residence on petition date | Debtor did not occupy the residence on the petition date (she moved out), so exemption fails | Debtor did not intend permanent abandonment; constructive occupancy and retention of ownership/mortgage liability preserve exemption | Denied objection; exemption preserved because no abandonment and constructive occupancy existed |
Key Cases Cited
- In re Duncan, 329 F.3d 1195 (10th Cir. 2003) (state opt-out exemptions applied in bankruptcy to same extent as in state court)
- Myers v. Matley, 318 U.S. 622 (U.S. 1943) (exemption rights measured as of the petition date against a hypothetical creditor levy)
- Rasmussen v. Rasmussen, 368 Ill. 137 (Ill. 1938) (abandonment defined as vacating and establishing residency elsewhere with no intent to return)
- Moore v. Flynn, 135 Ill. 74 (Ill. 1890) (homestead statutes remedial and to be liberally construed)
- In re Owens, 269 B.R. 794 (Bankr. N.D. Ill. 2001) (recognizing constructive occupancy where personal property left and spouse remains in home)
- In re Moulterie, 398 B.R. 501 (Bankr. E.D.N.Y. 2008) (rule allowing vacating spouse to claim homestead exemption while other spouse occupies pending marital adjudication)