## Facts

- Bradley and Mary Drenttel moved from Minnesota to Arizona in June 2003 after selling their Minnesota home and buying a residence in Arizona.
- On July 17, 2003, they filed a Chapter 7 bankruptcy petition in the District of Minnesota.
- The Arizona residence was unencumbered and valued at about $181,682.
- The Drenttels claimed the Arizona residence as exempt under Minnesota’s homestead statute, which exempted a debtor’s dwelling place (with a then-applicable cap of $200,000).
- The Chapter 7 trustee objected, arguing Minnesota’s homestead exemption could not protect out-of-state real property.
- The bankruptcy court sustained the objection; the Bankruptcy Appellate Panel reversed; the trustee appealed.

## Issues

1. Whether, when Minnesota is the applicable domicile state under 11 U.S.C. § 522(b)(2)(A), Minnesota’s homestead exemption may be claimed for a residence located outside Minnesota.
2. Whether Minnesota homestead law, construed under Minnesota interpretive rules, limits the exemption to property located within Minnesota.

## Decision

- The Eighth Circuit affirmed the Bankruptcy Appellate Panel.
- Minnesota exemption law applied because federal bankruptcy law ties available state exemptions to the debtor’s domicile during the relevant prepetition period.
- Minnesota’s homestead statute contained no express geographic limitation restricting the exemption to in-state property.
- Given Minnesota’s policy of construing homestead protections liberally in favor of debtors, the debtors could exempt their Arizona residence under Minnesota law.

## Legal Principles

- Under 28 U.S.C. § 1408 and 11 U.S.C. § 522(b)(2)(A) (pre-BAPCPA), the state exemption scheme available in bankruptcy is determined by the debtor’s domicile during the statutory lookback period, not by the situs of the asset.
- When the designated state’s homestead statute does not expressly restrict coverage to in-state property, a bankruptcy court may apply that statute to an out-of-state residence in the debtor’s bankruptcy case.
- State-law interpretive rules matter: where a state construes homestead exemptions liberally to protect the family home, courts should not add an implied geographic limitation absent clear statutory text.

## Conclusion

The court held that Minnesota’s homestead exemption could protect the debtors’ Arizona residence because federal bankruptcy law selected Minnesota as the applicable domicile state and Minnesota homestead law did not impose an in-state property limitation when construed in line with Minnesota’s debtor-protective approach.


In re Drenttel, 403 F.3d 611 (8th Cir. 2005)