Can Debtor Claim Homestead After Moving Into Assisted Living Facility?

Today, I responded to a caller who was considering filing Chapter 7 bankruptcy for his elderly parent. The parent owns a house in Florida free and clear of any mortgage debt. The parent suffers from dementia. The family moved the parent to an assisted living facility outside of Florida. The family rented the parent’s house with a one year lease. The caller states that the parent’s doctors believe the parent’s mental condition is actually improving with medication, and that the parent may be able to once again live independently in the Florida home. The caller wanted to know if the parent’s house would be protected in a Chapter 7 bankruptcy in Florida.

To protect a homestead in bankruptcy the debtor has to maintain the property as a primary residence. The debtor can be living elsewhere when he files if the debtor intends to return to the property and still considers the property to be his home. Whether an out-of-state debtor has the intent to retain a Florida property as their homestead is a case-by-case factual issue. In this case, the parent’s rental for a full year combined with the medical uncertainty would weigh against Florida residency and homestead protection. The parent may wish or hope to return to Florida, but it is unlikely the parent could show unequivocal plans to return at any particular time. The parent also would have a stronger case if the Florida house were rented monthly. To me, these facts suggest the parent left their home expecting to remain in assisted living and rented the property more to maximize income than to retain flexibility of personal use. I think the parent would lose the homestead fight.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida