Dina Travis
St. John’s University School of Law
American Bankruptcy Institute Law Review Staff
In McKee v. Anderson (In re McKee), the United States Court of Appeals for the Ninth Circuit (the “Court”) upheld a denial of a homestead exemption because the Debtor had no intention of returning to the home, even though the Debtor contended that returning was impossible given abuse from her former partner.[1]
In 2003, Michele McKee and Laura O’Kane began dating.[2] Several years later, they, along with O’Kane’s mother, purchased a lot in Palm Springs, CA and began building a new home.[3] While their new home was under construction, their “oft-troubled relationship” began to deteriorate, and McKee ended the relationship in 2016 after just one year of living in the Palm Springs home.[4] McKee testified that she suffered years of abuse at the hands of O’Kane and that she remained living in the home until it could be sold.[5] However, by December 2016, she felt that she had to leave.[6] In October 2017, McKee and O’Kane signed a settlement agreement under which McKee agreed to remove her personal effects and O’Kane agreed to cover “the payment of all property taxes, mortgage payments, and insurance premiums due on the house after April 2017.”[7] After she moved out, McKee rented a condominium and changed her address on her driver’s license and voter registration.[8] However, “her finances deteriorated, and she filed for chapter 7 bankruptcy in February 2021.”[9] When filing her bankruptcy petition, McKee attempted to claim a homestead exemption over the unsold Palm Springs home.[10] Since McKee did not reside at the home at the time of the filing, O’Kane, O’Kane’s mother, and Karl T. Anderson, the chapter 7 trustee in McKee's bankruptcy proceeding, objected to McKee’s claim.[11] After the bankruptcy court sustained the objection and the Bankruptcy Appellate Panel affirmed, McKee appealed to Ninth Circuit Court of Appeals.[12]
McKee claimed that under the California Code of Civil Procedure[13] an automatic homestead exemption which exists to protect a debtor “who resides (or who is related to one who resides) in the homestead property at the time of a forced judicial sale of the dwelling.”[14] Without the homestead exemption, the value of the property is considered property of the estate that is available to satisfy creditors’ claims.[15] “[A] debtor’s exemptions are ‘determined as of the date the bankruptcy petition is filed.’”[16] Therefore, to claim a homestead exemption, McKee needed to reside at the Palm Springs home on the date she commenced her bankruptcy proceeding.[17] To determine whether McKee resided in the Palm Springs home for homestead purposes, the Court examined her intent to return, since she was not physically occupying the property at the time.[18] Here, the Court affirmed the bankruptcy court’s finding that McKee did not possess the “requisite intent to return home” since she had no desire to live in the Palm Springs home; rather, she wished to “cash out her interest.”[19]
Further, McKee had the burden of proving that she resided at the Palm Springs home.[20] The Court found that her own testimony was the only evidence of her intent to return.[21] McKee argued that the bankruptcy court should have considered that it was impossible for her to return home due to O'Kane’s abuse, and her testimony of her intent was enough to establish the Palm Springs home as her homestead.[22] The Court found this argument and the two California cases that McKee relied upon unpersuasive.[23] First, in Moss v. Warner, 10 Cal. 296 (Cal. 1858), the California Supreme Court held that a family fleeing their homestead due to nearby hostility was entitled to the exemption since they were “mere sojourners.”[24] Second, in Michelman v. Frye, 238 Cal.App.2d 698 (Cal. Ct. App. 1965), a woman was forced from her home due to her husband’s domestic violence, and the California Court of Appeals held that was she entitled to the exemption since she “intended to and later did return” to her home.[25] These cases, however, were distinguishable because while they demonstrate that “a debtor may claim California's homestead exemption even when it is impossible for her to return home,” they do not support the contention that impossibility, regardless of intent, is enough for the exemption. [26] Additionally, in contrast to McKee's scant evidence, both cases contained “objective evidence reflecting the claimant's intent to return to the homestead.”[27] The Court noted that, with regard to intent, they look to what a debtor can demonstrate rather than what she can simply claim.[28] Accordingly, indicia that courts consider include “whether the debtor (1) left his personal belongings at the homestead,[29] (2) retained the homestead's address on his driver's license,[30] or (3) regularly visited the property.”[31] The Court here affirmed the bankruptcy court's finding that McKee could not satisfy any of these factors, notwithstanding her testimony to the contrary.[32] As such, McKee was unable to claim a homestead exemption for the Palm Springs home since she changed the address on her driver's license and voter registration to a new address, removed all of her personal effects from the Palm Springs home, and wished to cash out her interest.[33]
Accordingly, in bankruptcy cases where a debtor is claiming a homestead exemption for a property at which she no longer resides, a court will look to the debtor's intent to return to the property. Importantly, claiming impossibility alone, without objective indicia of intent to return, will not suffice in overcoming an objection to a claimed exemption.
[1] 90 F.4th 1244, 1249 (9th Cir. 2024).
[2] See id. at 1246.
[3] See id.
[4] Id. at 1246–47.
[5] See id. at 1246.
[6] See id. at 1247.
[7] Id.
[8] See id.
[9] Id.
[10] See id.
[11] See id.
[12] See id.
[13] See Cal. Civ. Proc. Code § 704.730 (defining the amount of a homestead exemption).
[14] McKee v. Anderson (In re McKee), 90 F.4th 1244, 1247 (9th Cir. 2024) (quoting In re Anderson, 824 F.2d 754, 757 (9th Cir. 1987)). Filing a bankruptcy petition “constitutes a forced judicial sale for [the homestead] exemption.” Id. (citing In re Gilman, 887 F.3d 956, 964 (9th Cir. 2018)).
[15] See id. (citing Cal. Civ. Proc. Code § 704.800) (“If the exemption applies, then the debtor's homestead cannot be sold unless the proceeds are enough to pay out all encumbrances on the property and the debtor's homestead exemption in full.”).
[16] Id. at 1247–48 (quoting Cal. Civ. Proc. Code § 703.140(c)).
[17] See id. (citing Cal. Civ. Proc. Code § 704.710(c)) (“[T]he statute defines a ‘homestead’ as ‘the principal dwelling (1) in which the judgment debtor or the judgment debtor's spouse resided on the date the judgment creditor's lien attached to the dwelling, and (2) in which the judgment debtor or the judgment debtor's spouse resided continuously thereafter until the date of the court determination that the dwelling is a homestead.’”).
[18] Id. at 1248 (citing Michelman v. Frye, 238 Cal. App. 2d 698, 706 (1965)) (“[P]hysical occupancy is not strictly necessary—if a debtor does not live there, she may still claim the homestead exemption if she ‘intend[s] to return’ to it.”).
[19] See id.
[20] See id. (citing Cal. Civ. Proc. Code § 703.580(b)).
[21] See id. (“The ‘only evidence’ supporting McKee's claim of homestead was ‘just her testimony’ that she intended to return to the property should O'Kane ever vacate. The rest of the record suggested that 'she had no intent to ever move back into the house.’”).
[22] See id.
[23] See id.
[24] Id. (quoting Moss v. Warner, 10 Cal. 296, 298 (Cal. 1858)).
[25] Id. at 1248–49 (quoting Michelman v. Frye, 238 Cal.App.2d 698, 700–01, 704 (Cal. Ct. App. 1965)).
[26] Id. at 1249.
[27] Id. (“Mrs. Warner established ‘no permanent place of residence,’ and instead lived an itinerant lifestyle, drifting through San Diego. Mrs. Frye ‘left most of her clothing and furnishings and all of the furniture at the family home’ and ‘at no time changed her voting address.’”).
[28] See id. (citing In re Karr, 2006 Bankr. LEXIS 4801, at *5 (9th Cir. BAP Oct. 2, 2006)).
[29] Id. (citing Karr, 2006 Bankr. LEXIS 4801, at *3).
[30] Id. (citing In re Bruton, 167 B.R. 923, 925–26 (Bankr. S.D. Cal. 1994)).
[31] Id. (citing In re Pham, 177 B.R. 914, 919 (Bankr. C.D. Cal. 1994)).
[32] See id. (citing Tromans v. Mahlman, 111 Cal. 646, 646 (Cal. 1896) (“McKee's post hoc testimony that she would have returned—had O'Kane ever vacated—does not save her claim. A debtor's testimony about her own intentions may be probative. But where, as here, ‘other facts to which she testified were inconsistent with such intention’ a court is 'not bound to accept her statement that she intended to reside [at the homestead] as conclusive[.]’”).
[33] See id.
