The Debtor’s great uncle Jennings had, in his waning years, received care and assistance from the Debtor and transferred his Rock Hill, S.C. home to her. When she filed bankruptcy, the Debtor asserted that Jennings was her dependent and claimed the property as exempt under N.C.G.S. § 1C-1601(a)(1). Less than three months after her bankruptcy was filed, Jennings died.
Sustaining the Trustee’s objection to the Debtor’s claimed homestead exemption, the bankruptcy court held that while the Debtor had provided sporadic assistance with paying his bills, “what she gave to Jennings was not financial support, but rather, care.” Relying on In re Preston. 428 B.R. 340 (Bankr. W.D.N.C. 2009), the court restated that as there is “a dearth of authority” regarding the statutorily undefined term “dependent”, instead turned to the related term “dependent spouse” as in domestic relations cases, defined therein as “as one who is ‘actually and substantially’ dependent upon another for maintenance and support or is ‘substantially in need of such maintenance and support’ from the other. Id. at 343 (quoting Vandiver v. Vandiver, 274 S.E.2d 243, 250 (N.C. Ct. App. 1981)).
The court also held that as Jennings had died shortly after the filing of the bankruptcy, the Rock Hill property could no longer be claimed as his residence.
While a loss for the this particular debtor, the “actually and substantially dependent” standard could be worse. For example, under 26 U.S.C. § 152, the IRS would not have defined Jennings as a dependent. Nor does this definition require that the Debtor provide the majority of the financial support, only that it be “substantial.”
As, short of a Zombie Apocalypse, Jenning’s death conclusively and inarguably precluded the Rock Hill property from being his residence (and even there it is unclear to the extent that the Undead can be claimed as dependents), the bankruptcy court could have limited its holding to that issue alone.
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