Homestead Exemption Issues

Mississippi has opted out of the federal exemption scheme.    Miss. Code Ann. §85-3-2.  Debtors who have been domiciled in Mississippi for 730 days prior to filing bankruptcy may claim as exempt up to $75,000.00 of equity value in real property used as a primary residence (not to exceed 160 acres). Miss. Code Ann. §85-3-21.  However, did you know that the statute also provides that widows or widowers over the age of 60 may claim the exemption even if they do not reside on the property?  Apparently, the authors of this legislation believed that Mississippians who attain the advanced age of 60 would surely move to rest homes or in with family members when their spouses die.  Oh! – this statutory provision was enacted in 1914 when the life expectancy was around 52.  Fast forward to the 21st century – if one is unfortunate enough to have his/her spouse die at such an early age, is it possible to lease out the “old home place” and travel the world without losing the homestead exemption?  Maybe!

A husband and wife share one homestead exemption. Joe T. Dehmer Distributors, Inc. v. Temple, 826 F. 2d 1463 (5th Cir 1987). In a  joint bankruptcy case the shared homestead exemption is not a problem because the husband and wife claim a single $75,000.00 exemption on Schedule C.  However, the “shared” homestead exemption seems to be problematic when only one spouse files bankruptcy.    The issue is whether the exemption amount is applied against the full equity value of the property even though one spouse is not in bankruptcy, or whether the exemption amount is applied against the debtor’s 1/2 interest in the property.  Some debtors’ attorneys still take the position that the debtor can claim the full $75,000.00 exemption against his 1/2 interest in the property.

My position is that the exemption is applied against the full equity value even if only one spouse files bankruptcy.  This seems clear from Dehmer.   Applying the full homestead exemption against a 1/2 interest in the property is equivalent to allowing 2 exemptions in the same property.

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