Case Summary:
The debtors owned an 82-acre parcel of real estate, 40 acres of which the parties agreed constituted their homestead. The entire property was encumbered by a single mortgage. The chapter 7 trustee sought to apportion the mortgage balance between the homestead and non-homestead parcels in accordance with their relative values. The debtors objected, arguing that the trustee’s request constituted an impermissible infringement of their homestead rights. The bankruptcy court ruled that Wisconsin courts have held that under § 846.11, debtors have the right to “insist” that when a single mortgage covers both homestead and non-homestead property, the non-homestead property must be sold first. The homestead exemption is to be liberally construed and is favored above the rights of creditors. Under the circumstances, the debtors were entitled to allocate the mortgage in such a way as to maximize their homestead exemption. The complaint

Statute/Rule References:
Wis. Stat. § 846.11 -- Homestead, How Sold

Key Terms:
Exemptions (Homestead)