Posted on Apr 20, 2013

In the case of In re Robert T. Smith, Case No, 11-39101-H3-7, the debtor had inherited a home in Crosby Texas from his aunt. There had been a dispute with the executor of the estate, but it was settled and the executor deeded the house to the debtor, less than 1215 days before he filed bankruptcy.

After he filed, the chapter 7 bankruptcy trustee and two creditors objected to the debtor claiming the home as homestead, arguing that debtor's conduct violated 522(o) of the Bankruptcy Code, that he lacked intent to make the property his homestead, and that since the debtor was not deeded the home until less than 1215 days before filing bankruptcy, Section 522(p) limited the amount of the home that he could exempt to $145,000.00.

Houston U.S. Bankruptcy Judge Letitia Paul shut down the objecting parties, holding that they proved no fraudulent intent. She also held that the objecting parties have the burden of proving that exemptions are not properly claims under Bankruptcy Rule 4003(c). She went on to hold that:

In Texas, an individual who seeks homestead protection has the initial burden to establish the homestead character of the property. To meet this initial burden of proof, the homestead claimant must show a combination of both overt acts of homestead usage and the intention on the part of the owner to claim the land as a homestead. Once the claimant has established the homestead character of his property, the burden shifts to the creditor to disprove the continued existence of the homestead. Once gained, homestead rights are not easily lost. The only way for property to lose its homestead character, after it has been dedicated as a homestead, is by death, abandonment or alienation. Matter of Bradley, 960 F.2d 502 (5th Cir. 1992).

Judge Paul went on to hold that the debtor had established the homestead character of the property and the objecting parties had not met their burden of proving that it had lost homestead character. she also held that Sec. 522(p) did not apply, because the debtor acquired title to the property when the decedent died with a valid will leaving the property to him, not when the executor eventually deeded the property to him.

Read More About Crosby Texas Man Prevails on Homestead Claim of Inherited Property in Houston Bankruptcy Court...

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization