“Homestead accounts” come up on may of my asset protection meetings. To review, a so-called homestead accounts refers to bank accounts containing exclusively proceeds from the sale of an exempt homestead property. Courts have exempted this money from creditors if, and to the extent, the money is intended to be reinvested in a new homestead. The definition of homestead account leads to many questions about how long the money is protected and what things the debtor must do to ensure protection. The most frequent question involves time: for how long will a homestead account be afforded exempt status?
I read a bankruptcy case from the Tallahassee Division which provides explanation by example. The bankruptcy court exempted money in a homestead account 13 months after the debtor sold his former homestead. Thirteen months seems like a long time to replace a home. But, the court noted that during this time period the debtor looked seriously at 6-12 houses and made written offers on three houses, none of which resulted in a purchase. The offers were for reasonable amounts consistent with a serious attempt to purchase the home. One offer failed to close only because an inspection revealed structural problems.
This case shows that time is not the only issue. The court focused on whether the facts indicated the debtor’s serious and ongoing intent to replace his former homestead. It seems that there may be no outside time limit on maintaining a homestead account when the debtor is engaged in an ongoing active search for a new home. In re Fling: Case No. 10-40454.