No Homestead
Exemption in House Owned by SMLLC
A recent decision of the Sixth
Circuit Bankruptcy Appellate Panel has held that there is no homestead
exemption for a residence owned not by the debtor but rather the debtor’s
single-member LLC. In re Breece, 2013 WL 197399 (6th Cir. BAP (Ohio) Jan.
18, 2013).
Monea Breece appealed the
ruling of the bankruptcy court that she could not claim a homestead exemption
in real property owned by an LLC of which Breece was the sole member; Breece
resided in that property. She claimed a
homestead exemption in the property, identifying it as her property (the LLC
was not identified) on her Schedule A.
After briefing and a hearing the bankruptcy court held there to be no
homestead exemption in the property.
Under the Ohio LLC Act, an
interest in an LLC is personal property that does not confer on the member an interest
in the LLC’s property. Ohio Rev. Code Ann. § 1705.17; id. § 1705.34; In re Liber, 2012 Bankr.LEXIS 2244, *10 (Bankr. N.D. Ohio May 18,
2012). After a comprehensive review of
and response to arguments for allowing the exemption, these rules were applied
to uphold the bankruptcy court in rejecting the claimed homestead
exemption. Further, the exemption was
rejected on the basis that it may be claimed only as to property that is in the
bankruptcy estate. In this case the
realty was not in the estate. Rather, it
was Breece’s interest in the LLC that was in the estate. Ergo, there was another basis for the denial
of the exemption.
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