{"id":1789,"date":"2021-05-21T18:29:33","date_gmt":"2021-05-21T18:29:33","guid":{"rendered":"http:\/\/www.westcoastbk.com\/blog\/?p=1789"},"modified":"2021-05-21T18:31:15","modified_gmt":"2021-05-21T18:31:15","slug":"no-stacking-of-california-bankruptcy-exemptions","status":"publish","type":"post","link":"https:\/\/www.westcoastbk.com\/blog\/2021\/05\/no-stacking-of-california-bankruptcy-exemptions\/","title":{"rendered":"No Stacking of California Bankruptcy Exemptions"},"content":{"rendered":"\n

By Ryan C. Wood<\/a><\/p>\n\n\n\n

There is no stacking of the California homestead exemption\npursuant to California Civil Procedure. \nThe Ninth Circuit Court of Appeals held that Section 522(m) of the\nBankruptcy Code is not applicable in California given California has opted out\nof the Federal Exemption scheme and adopted exemptions under California State law.  See CCP 703.140 and CCP 704.  Therefore a married couple cannot stack the\nhomestead exemption, which means both spouses claiming the homestead exemption\nto double the amount of equity they can protect in their primary\nresidence.  This issue became more\nrelevant due to California recently increasing the maximum homestead exemption\npursuant to CCP 704.30 to between $300,000 and $600,000 depending upon the\nmedian home value for the prior year in the California County.  In the Bay Area that means all residents of\nall Bay Area counties have a right to a $600,000 homestead exemption given the\nmedian home price in all Bay Area counties far exceeds $600,000.  <\/p>\n\n\n\n

But a married couple in California cannot stack the $600,000\nhomestead exemption to exempt $1.2 million in equity in their primary residence\nwhen filing for bankruptcy; just $600,000. \nThis is not true in every state. \nIn Florida the homestead exemption can be stacked for the benefit of the\nbankruptcy filer.<\/p>\n\n\n\n

What Are Exemptions?<\/strong><\/p>\n\n\n\n

Exemptions are what protect assets from being sold or\nliquidated when a bankruptcy case is filed. \nThe exemption exempts the asset from the bankruptcy estate that is\ncreated upon filing for bankruptcy protection. \nThere is the Federal Exemptions and each state may choose to create\ntheir own exemptions and opt out of the Federal Exemption scheme.  California created two sets of exemptions.  One set is pursuant to CCP 703.140 and is\nknown for its generous wild-card exemption that can be applied to any type of\nasset.  California created a second set\nof exemptions pursuant to CCP 704 and is known for its large homestead\nexemption to protect equity in the bankruptcy filer\u2019s primary residence.  The two sets of exemptions under California\nlaw are very different and protect different amounts of types of assets.<\/p>\n\n\n\n

California Opted Out\nof The Federal Exemption Scheme<\/strong>  <\/p>\n\n\n\n

Again California opted out of the Federal Exemption scheme\nand that has legal significance. \nBankruptcy Code Section 522(m) provides as follows:  \u201cSubject to the limitation in section 522(b),\nthis section shall apply separately with respect to each debtor in a joint\ncase.\u201d  States like Florida pursuant to Section\n522(m) \u201cstacking\u201d of claims of exemption. \nSee (In re Rasmussen, 349 B.R. 747, 753-754 (Bankr. M.D. Fla.\n2006)).  Stacking is expressly prohibited\nunder applicable California law though.<\/p>\n\n\n\n

California Civil Procedure Section 703.110(a) prohibits the\nclaiming of separate exemptions by married couples.  This has been true since 1987.  See (In re Talmadge, 832 F.2d 1120, 1123-25\n(9th Cir. 1987)).  The Talmadge case is\nfrom the Santa Rosa Division of the United States Bankruptcy Court for the\nNorthern District of California.  The\nBankruptcy Court first held that California exemption statutes were\nunconstitutional as applied to debtors that are married.  The lower Bankruptcy Court held that California\nCode exemptions\/sections could not survive a constitutional attach given\ncertain subsections of California Code: (1) contain vague and\nambiguous language in violation of the fourteenth amendment’s due process\nclause, (2) arbitrarily discriminate against married couples in violation of\nthe fourteenth amendment’s equal protection clause, and (3) conflict with\nfederal law and, therefore, violate the Supremacy Clause of Article VI of the\nConstitution.<\/p>\n\n\n\n

The District Court did not agree, reversed the Bankruptcy\nCourt and instead held that equal protection of the law is not denied by the\nCalifornia exemption statutes limiting married debtors to a single set of\nexemptions and the Ninth Circuit Court of Appeal agreed.<\/p>\n\n\n\n

In Talmadge each debtor claimed a full set of exemptions, thereby \u2018doubling up\u2019 their exemptions under applicable California statute.\u00a0 The Talmadge\u2019s and their bankruptcy attorney<\/a> argued that California CCP 703.140 conflicted with Bankruptcy Code Section 522(m).\u00a0 The Ninth Circuit, in affirming the District Court\u2019s decision disallowing the debtors\u2019 stacked exemptions, concluded that the provisions of 11 U.S.C. \u00a7 522(m) did not apply to California debtors because California had opted out of the federal exemption scheme and that provisions of the California Code of Civil Procedure prohibited married couples from obtaining more than a single exemption with regard to a specific property where the amount of the exemption had a maximum dollar amount limit. In re Talmadge, 832 F.2d 1120, 1123-25 (9th Cir. 1987). <\/p>\n\n\n\n

Accord, In re Rabin, 336 B.R. 459, 460 (Bankr. ND CA 2005)\n(\u201cUnder California law, spouses who own and reside in a homestead are entitled\nin bankruptcy to a single homestead exemption. Cal. Code Civ. Proc. \u00a7\u00a7 703.110,\n704.710(b), (c), 704.730(a) (2). This is so regardless of whether both spouses\nfile bankruptcy, and regardless of whether the spouses file joint or separate\nbankruptcy petitions. Cal. Code Civ. Proc. \u00a7 704.730(b); Talmadge v. Duck (In\nre Talmadge), 832 F.2d 1120, 1123-25 (9th Cir. 1987) [**3] (married debtors\nfiling joint bankruptcy petition); In re Nygard, 55 B.R. 623, 626 (Bankr. E.D.\nCal. 1985) (dictum re married debtors filing individually. <\/p>\n\n\n\n

Why Bankruptcy Exemptions Stacking Became an Issue<\/strong><\/p>\n\n\n\n

Unfortunately in 1984 bankruptcy attorneys<\/a> lost a tool to help bankruptcy filers keep their assets when seeking to discharge their debts. Prior to 1984 California bankruptcy filers could choose between using the Federal Exemptions under Section 522(d) or choose California State exemptions.\u00a0 In 1984 the California State legislature took advantage of opt out provision of Bankruptcy Code Section 522(b)(1) when enacting California Civil Procedure Code 703.130 and 703.140.\u00a0 Once California exemptions became the only legal chose for California bankruptcy filer\u2019s Bankruptcy Code Section 522(m) no longer was applicable.\u00a0 Since 1984 stacking of exemptions for California bankruptcy filers is prohibited.\u00a0 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Ryan C. Wood There is no stacking of the California homestead exemption pursuant to California Civil Procedure.  The Ninth Circuit Court of Appeals held that Section 522(m) of the Bankruptcy Code is not applicable in California given California has opted out of the Federal Exemption scheme and adopted exemptions under California State law.  See […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[19],"tags":[269,391,392,390],"_links":{"self":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/1789"}],"collection":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/comments?post=1789"}],"version-history":[{"count":1,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/1789\/revisions"}],"predecessor-version":[{"id":1790,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/1789\/revisions\/1790"}],"wp:attachment":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/media?parent=1789"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/categories?post=1789"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/tags?post=1789"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}