Friday, March 29, 2013

No Homestead Exemption in House Owned by SMLLC

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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