Bankruptcy

Homestead Protection For Commercial Building With Upstairs Apartment

By Jonathan Alper

The issue is whether you can exempt as homestead a commercial building with an second floor apartment used as your primary residence. A south Florida debtor owned a commercial building in Miami. He operated a adult entertainment club on the first floor. He claimed that he lived in an apartment on the second floor. During the day, when the club was closed, the debtor used the kitchen and the employee showers for personal use. He filed bankruptcy and sought to protect the entire property as homestead. The bankruptcy trustee objected to the exemption. The bankruptcy court overruled the debtor?s exemption of the entire building as homestead and ordered that the trustee sell the property for the benefit of the bankruptcy estate, reserving to the debtor a percentage of the sale proceeds for his extent of personal use.

The court ruled that when a debtor resides in a building used for residential and commercial purpose the appropriate resolution is to sell the entire property and apportion the net proceeds between the homestead and non-homestead portion rather than declare the building to be entirely homestead or entirely non-homestead. Its significant that in the Miami case the entire building was zoned commercial and that the business was open to the public. Therefore, I do not think the result would be the same if a debtor uses a part of a residential property for a home office. The case is In re Darrell Wilson, Case NO. 07-21261 in the Southern District of Florida.

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

Full post as published by Florida Bankruptcy Law on March 25, 2009 (boomark / email).