Are trailer homes, pull-behind campers, and RVs protected in Nebraska bankruptcy cases?
Homes are protected in bankruptcy by a law called the Homestead exemption, and traditionally that exemption applies to homes built on land a debtor owns. But what about portable homes and RVs sitting on rented lots?
Case #1: Foley: A Tent of Cloth
In a 1951 court opinion (In re Foley) the debtor and his family lived in a Glider trailer house parked on a lot rented from the Garden Valley Trailer Court. The question in that case was whether a debtor could claim a Homestead exemption when the ground the trailer home sat upon was merely leased by the debtor.
If a tent of cloth can have the essential attributes of a homestead, there is no apparent reason why a trailer house cannot.
The Nebraska bankruptcy court ruled that “a debtor need not be the absolute owner in fee in order to establish a homestead right in land, but that any interest in land, coupled with the requisite occupancy by the debtor and his family, is sufficient to support a homestead exemption.“ The court in Foley ruled that an oral month-to-month lot rent agreement was enough to invoke the homestead exemption, but the court pointed out that a Tenancy at Will was not sufficient. (A Tenancy at Will is where there is no agreement to pay rent or a situation where someone is basically a squatter.)
The Foley opinion makes it clear that a debtor does not have to own land to claim a homestead exemption. But what about the nature of the home? Does it have to be a home built on a foundation or can it be a movable home, camper or RV? The Foley court answered that question as well. “It may be a ‘brown stone front,’ all of which is occupied for residence purposes, or it may be a building part of which is used for banking or business purposes, or it may be a tent of cloth. If a tent of cloth can have the essential attributes of a homestead, there is no apparent reason why a trailer house cannot.”
Case #2: McGinnis: A Trailer on Wheels
In the case of In re McGinnis decided in 2000, the Nebraska court was faced with an objection to the debtor’s claim of a homestead exemption in a 5th Wheel trailer. The debtor had an oral month-to-month lot lease in a trailer home park. The Chapter 13 Trustee objected to the homestead exemption because the trailer was not permanently annexed to the real estate–that is, the trailer sat on wheels and could be moved at any time. The debtor countered that the trailer was sufficiently connected to the land because it was connected to city water, sewer and electrical systems.
The Court observed that while the home was on the leased lot the trailer was not hooked up to any vehicle and the trailer was held in place by various braces in addition to being connected to utility services. “The Trailer in the present case was permanently annexed to the land following the liberal construction encouraged in Foley. The Trailer was held in place by braces to the land and was connected to electricity, plumbing, sewer and water service. Therefore, according to the analysis in Foley , the Trailer was permanently annexed to the land.”
Case #3: Zeleny: Vehicles Pulling a Living Space
In 2006 the Nebraska Bankruptcy Court decided the case of In re Zeleny involving whether a debtor could claim a homestead exemption in the vehicle that pulled a 5th Wheel Trailer. In Zeleny the debtor had traded a motor home for a 5th Wheel Trailer and a pickup truck that pulled it. The debtor attempted to claim that both the trailer and the pickup truck were homestead protected since they were both purchased from the proceeds of selling an exempt motor home.
That power unit/pickup truck can be used for other transportation . . . I decline to stretch the statutory definition to fit the facts of this case.”
This time the bankruptcy court limited application of the homestead exemption an denied protection of the vehicle pulling the trailer. “The Nebraska homestead exemption statute at Neb. Rev. Stat. § 40-101, et seq., does not provide for a claim of a homestead exemption in a vehicle that pulls the living space, whether it be a fifth-wheeler or some other type of trailer. The power unit/pickup truck cannot be permanently affixed to the real estate and was not in this case. That power unit/pickup truck can be used for other transportation, in addition to its use as a tow vehicle for the fifth-wheeler. Considering the Nebraska statutory exemption for a homestead and the type of units claimed in this case as eligible for the homestead exemption, I decline to stretch the statutory definition to fit the facts of this case.”
Case #4: Bernhardt: A Temporary Home
In 2008 the court issued an opinion in the matter of Bernhardt regarding whether a debtor could claim a homestead exemption when they rented a motor home as a temporary residence on his farmland while repairs to his permanent home were being made. The debtor owned two traditional homes on his 160 acre farm but could not live in either since there were in a state of disrepair. In Bernhardt the issue was not whether the motor home was exempt since it was not owned by the debtor but merely leased. Rather, the issue was whether the requirement that a debtor “reside” on the property was satisfied.
The Nebraska homestead law says the following: “A homestead not exceeding sixty thousand dollars in value shall consist of the dwelling house in which the claimant resides, its appurtenances, and the land on which the same is situated, not exceeding one hundred and sixty acres of land . . . .”
The bankruptcy trustee objected to the homestead exemption because the motor home was a “recreational vehicle” and the debtor was only temporarily residing in the motor home.
The court disagreed with the trustee and pointed to the fact that the motor home was connected to electrical and water systems and further stated that “given the homestead statute’s liberal construction, I find that Debtors’ actual occupancy on the Farm property in which they own an undivided one-fourth interest, coupled with their intent to occupy the dwelling house upon its repair, is sufficient to support their claim of a homestead exemption.”
The case law makes it very clear that trailer homes, pull-behind campers and recreational vehicles may be protected under the Nebraska homestead law, but important questions need to be asked.
- Is the mobile home your primary residence? If you live in a trailer home and pay lot rent or own the land it sits on, there is a good chance the home is protected by Nebraska’s homestead exemption, but you must live in the home full time and this cannot be a trailer used for a few months each year. This must be your full-time home on the day the bankruptcy is filed.
- Is the trailer home connected to real estate? A portable home that is pulled by a truck and is not connected to the ground will not be considered a homestead under Nebraska law. The home must be connected to the ground and be somewhat immovable because of those connections. The home should be connected to utility services for electricity, water and sewers. The presence of braces connecting the home to the ground is a strong indicator that the home is sufficiently affixed to the ground to qualify for the homestead exemption.
- Does the home sit on land you rent or own? To qualify for Nebraska’s homestead exemption, the debtor must have some legal interest in the land the home sits upon. A month-to-month written lease agreement is sufficient to claim an “interest” in the real estate and outright ownership of the land is not required, but a Tenancy at Will is not sufficient.
- Vehicles pulling a camper are not protected by the homestead exemption. Although a pull behind camper may be protected by the homestead exemption, the truck pulling it is not.
- RVs have questionable protection. It is likely that a trustee will question whether a RV qualifies for the homestead exemption unless you reside in the RV full time and the RV must be connected to utility services and perhaps braces should be present. If a RV is unhooked from utility services frequently and is driven on a routine basis, it starts to resemble a vehicle more and a homestead less.
Image courtesy of Flickr and Albuquerque Film Office.