Busting the Homestead Exemption - Constructive Trust/Abandonment

Bruce W. Akerly
Oct 15 2019

Although sacrosanct, homestead rights can be abandoned. The creditor must prove abandonment. Given the nature of the right, the burden is a substantial one.

To prove abandonment generally requires a showing that the debtor discontinued use of the homestead through some overt act and intent to not return to the property. Proof of intent must be clear and convincing, conclusive and undeniable. This emphasizes the significant burden on the creditor. But, fortunately, it is not an impossible burden.

What happens if there is an abandonment? It is not necessarily permanent. A debtor can abandon a homestead and later re-create a homestead in the same property. During this “gap” period, however, third party creditor rights can attach to the homestead. One example is the filing of a non-consensual lien, such as a judgment, in the property records. In such an instance, discovery of chronological facts will be important to determine if a gap arose in addition to abandonment.

Abandonment can also be partial in nature. The creditor must establish abandonment and the precise portion that has been abandoned. Precision is the key.