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Rental payments to debtor protected by bankruptcy homestead exemption

Filing for bankruptcy protection is often the best option for an individual seeking a fresh financial start.
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    February 01, 2014 /24-7PressRelease/ -- Rental payments to debtor protected by bankruptcy homestead exemption

Article provided by The Law Offices of Alexzander C. J. Adams, P.C.
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Filing for bankruptcy protection is often the best option for an individual seeking a fresh financial start. One positive aspect of a bankruptcy proceeding for a debtor is that certain property, such as part of the value of a home, can often be exempted from the bankruptcy under a "homestead exemption."

Under Oregon law, such protection can even protect a portion of the proceeds of the sale of a home, if the proceeds are held for less than one year with the intention of buying another home. However, what if a debtor is receiving rent for a portion of his or her homestead? Could those lease payments also be exempt?

The United States Bankruptcy Court discussed this situation in the case of In re Nork.

A homestead exemption . . . for a cell phone tower

The debtor filed for bankruptcy protection, claiming a homestead exemption under Oregon law. The debtor lived on a 10-acre parcel of land in semi-rural Medford, Oregon, and a corner of the property was leased to a cell phone company. The company had erected a cell phone tower and made rental payments of $1,000 per month, which the debtor used to make her monthly mortgage payments on her home.

The bankruptcy trustee--the individual charged with administering the bankruptcy--objected to this exemption, asserting that the Oregon exemption did not apply to the cell phone tower.

Were the rental payments exempt?

In reviewing the case, the United States Bankruptcy Court first noted that because the agreement between the parties provided that the cell phone company, and not the debtor, actually owned the property on which the cell tower was placed, the issue could be resolved on that basis. In other words, the tower was not really property of the bankruptcy estate and was thus not subject to the trustee's control or the debtor's exemption claim.

However, the court recognized that underlying the dispute was whether proceeds from the rental payments were covered by Oregon's homestead exemption. Oregon law requires that the homestead exemption be construed liberally, and the court considered the situation in that light.

The court explained that the homestead provision may be applied to cash proceeds of a sale of homestead property. Therefore, it held that the homestead exemption not only could apply to sale proceeds, but also to rental proceeds to the extent they are being used to pay debt secured by the homestead.

The debtor's rental proceeds would be exempt from bankruptcy and the trustee's objection was overruled.

Protection for many possessions

If you are considering bankruptcy, but are concerned that all your possessions will be taken away, you should know that the law provides protection for certain amounts of many of your belongings. You should contact an experienced bankruptcy attorney who can offer specific advice on your situation and help you navigate to the best option for your circumstances.

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