Summary of a Recent
Judicial Development in
Bankruptcy

Objection to Debtor's Claim of Exempt
Rural Homestead Property Held in CRP Denied

Chuck Munson
National AgLaw Center Graduate Assistant

In In Re Baker, 307 B.R. 860 (Bankr. N.D. Tex. 2003), the United States Bankruptcy Court for the Northern District of Texas held that the debtor's usage of her land tract for cattle grazing and hunting satisfied her burden of establishing a rural homestead under Texas law. The court found that the fact that the debtor's tract had been placed in the Conservation Reserve Program (CRP) did not terminate her homestead rights, and that the debtor's contract for sale of her undivided interest in that tract, which had not yet closed as of her bankruptcy filing, did not divest the land of its homestead protection. Id. at 862-64.

The debtor owned an undivided interest in a 161.5 acre tract of land in Haskell County, Texas, which she had formerly used as grazing land for cattle and for hunting, which was placed in the Conservation Reserve Program. Id. at 862. The debtor entered into a contract for the sale of her interest in the tract prior to filing her petition for bankruptcy, but the sale had not yet closed. Id. First National Bank - Haskell (FNB) objected to debtor's claim that her tract was an exempt rural homestead property and therefore protected from the FNB. Id.

The court found that under Texas law, when a party claiming rural homestead protection resides on a separate tract of land, the uninhabited property must be used in connection with the home tract for the comfort, convenience, or support of the family. Id. at 863. Noting that Texas courts have recognized cattle grazing or hunting as satisfying the burden of establishing a rural homestead, the court held that debtor's usage satisfied this burden. Id. The court went on to hold that the fact that the debtor's tract of land had been placed in the CRP did not terminate her rural homestead rights, explaining that under the CRP, the debtor was paid for taking the land out of cultivation but not precluded from all other uses of the land, and was therefore still entitled to possession and control of the land. Id. The court also ruled against FNB's argument that debtor's contract for the sale of her interest was contrary to her homestead claim, stating that an intention or attempt to sell a homestead does not amount to an abandonment under Texas law as long as the homestead claimant retains possession and has no intent to abandon unless the sale materializes. Id. at 864.

The case was decided on September 18, 2003; this summary was posted July 20, 2007.