In re Navarro, 504 B.R. 316

Debtor filed Chapter 13 and claimed a $44,521 homestead exemption under Puerto Rico’s 2011 Home Protection Act for his principal residence in Caguas.
At the petition date the Debtor continued to live in the residence but rented a one‑bedroom studio within the property for $350/month.
Trustee objected, arguing Article 3’s requirement that the residence be ‘‘occupied ... exclusively as a principal residence’’ precludes homestead protection where part of the dwelling is rented.
Debtor argued (1) Article 7 preserves homestead when the owner temporarily leases the home due to relocation for work, study, military, or medical reasons, and (2) exemptions must be liberally construed under Puerto Rico law.
Court found Article 7 addresses temporary relocation and not the present factual scenario of partial in‑place rental; federal bankruptcy definitions and precedent were considered but Puerto Rico law controls because Debtor elected state exemptions.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether partially renting a principal residence disqualifies the property from the homestead exemption under Puerto Rico’s 2011 Home Protection Act	Trustee: Partial rental means the property is not occupied "exclusively" as the debtor’s principal residence, so homestead protection cannot apply to the rented portion or the whole	Debtor: He still occupies the residence as his principal home; Article 7 protects homestead when the owner temporarily leases the home; exemptions should be liberally construed	Court: Partial rental disqualifies the rented portion from exemption; homestead extends only to the portion used exclusively as the debtor’s principal residence (total exemption of whole property denied)
Whether Article 7 preserves homestead when owner rents part of the residence while still residing there	Trustee: Article 7 does not apply because it covers situations of temporary relocation, not partial in‑place rentals	Debtor: Article 7 and liberal construction support preservation of homestead status	Court: Article 7 governs temporary relocation scenarios and does not apply to a situation where the owner continues to reside on the property while renting a portion; it does not save the rented portion from being nonexempt

In re Picchi, 448 B.R. 870 (1st Cir. BAP 2011) (holding a property partially rented is not necessarily the debtor’s principal residence for bankruptcy definitions)
In re Englander, 95 F.3d 1028 (11th Cir. 1996) (when part of property lacks homestead status and the property is indivisible, trustee may sell entire property and apportion proceeds)
In re Nofsinger, 221 B.R. 1018 (Bankr. S.D. Fla. 1998) (homestead exemption extends only to portion used as debtor’s residence; rented portions are nonexempt)
Thomas v. Graham Mortgage Corp., 408 S.W.3d 581 (Tex. App. Austin 2013) (temporary renting does not change homestead character absent clear abandonment)
In re Wierschem, 152 B.R. 345 (Bankr. M.D. Fla. 1993) (denying homestead exemption where property used predominantly for rental purposes)