Divorced debtor loses homestead rights in New Hampshire

A homeowner whose divorce was final before he filed for bankruptcy can’t claim a homestead exemption when the property was sold and he received half the proceeds, according to a recent ruling of the Bankruptcy Court in New Hampshire in the Visconti case.

The debtor lived in Hampstead in 2007 when he conveyed his interest in his house to his wife. He then moved out of the home and filed for divorce. The divorce decree proposed that the the couple sell the house and split the proceeds. This did not happen for a while; perhaps because of the poor market, or the desire to keep their children in one home.

Earlier this year the husband filed a Chapter 7 bankruptcy case in New Hampshire. At about the same time, the wife finally sold the house, and a large check — over $33,000 was sent to the husband as his share. The husband tried to declare this money exempt in the bankruptcy case, arguing that this was essentially funds from real estate, and that his $100,000 homestead exemption covered it.

No dice, said the trustee, who sued to recover the money for distribution to creditors. U.S. Bankruptcy Judge J. Michael Deasy agreed with the trustee, and categorized the money as more in the nature of personal property, and not real estate that could be subject to homestead rights, especially since the debtor hadn’t been living there since 2007.

This case highlights the importance of speaking with a bankruptcy attorney before filing either a divorce or bankruptcy case, as early action might have saved this money for the debtor.


By Doug Beaton

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