All posts tagged exemptions

Important new exemption for debtor’s “deposit account.”

These new exemptions became effective January 1, 2020.

CCP 704.220. (a) Money in the judgment debtor’s deposit account in an amount equal to or less than the minimum basic standard of adequate care for a family of four for Region 1, established by Section 11452 of the Welfare and Institutions Code and as annually adjusted by the State Department of Social Services pursuant to Section 11453 of the Welfare and Institutions Code, is exempt without making a claim.

Well that’s a hand full.  Translation, money in the debtor’s bank account is automatically exempt up to a “basic standard amount.”  I should say automatically as long as the debtor does not use the 703 exemptions.  It appears that right now that the basic amount is $1,724.  It also appears that that amount is fixed whether the debtor is single or has a family of four.  I am looking into that now.

But the big one is, is 704.225 which says:

§ 704.225.  Money in a judgment debtor’s deposit account that is not otherwise exempt under this chapter is exempt to the extent necessary for the support of the judgment debtor and the spouse and dependents of the judgment debtor.

I haven’t found anything helpful in figuring out what is “necessary for the support,” in the new legislation at least  If the debtor has $25,000 in a savings account, it is exempt if that amount is necessary for the debtor’s support.  I guess if the debtor has a job and can support himself from his current income, no amount would be necessary. Read more…

How far can we push Law v. Siegel?

I was casually reading a couple of bankruptcy cases and I came across a case where the debtor reopens his case to amend his exemptions. The trustee objects to the exemption based on an argument that when the case was closed, the Debtors lost their ability to amend their exemptions as a matter of course under Rule 1009(a) of the Federal Rules of Bankruptcy Procedure. When you read Rule 1009(a), it says (in part),

“A voluntary petition, list, schedule, or statement may be amended by the debtor as a matter of course at any time before the case is closed.”

But, what happened to Law v. Siegel? In that case, the U.S. Supreme Court said that the debtor may amend his exemptions at any time. Not only that, but the

Read more…

Does an annuity inherited by a spouse constitute “retirement funds” within the meaning of § 522(b)(3)(C)?

For the purpose of this blog, I am going to assume that the annuity in question would be exempt had the decedent been alive.

At first, I thought the answer was simple:

Assuming the annuity was a retirement fund to begin with, the answer is yes, it continues to be a retirement fund because under the IRC, an inherited retirement fund is NOT treated as “inherited” if the spouse is the person who inherited it. That is in 28 U.S.C. 408(d)(3)(C)(ii)(II), quoted for convenience: Read more…

Proposed Changes to the California Homestead Exemption

SB 308 is a new bill introduced by Senator Bob Wieckowski in the California State Senate that provides significant improvements to California’s current exemptions including:

  • increasing the homestead to $300,000 for all individuals;
  • removing the 6 month reinvestment requirement;
  • increasing the exemption for vehicles to $6,000;
  • establishing that bankruptcy alone is not an event of default; and
  • creating a grubstake of $5,000 for self-employed individuals.

The complete text of the amendment can be found here.

Note: the link above is to the original proposal and is easy to read. The original proposal provided for a $700,000 exemption which was amended down to $300,000. A more difficult to read, updated version can be found here.

The Homestead Exemption and Substance Abuse

An odd couple you say?  The skit put on at the Inns of Court meeting last week made me want to have another beer, then retire.  There were three would-be clients who had three issues that I thought I knew (one I actually did).  The poor lawyer, 40 years experience he kept saying, gave the wrong advice three times, started tipping the bottle and received advice from the state bar – very well done.

Client one had just sold their home.  They had $65,000 proceeds in the bank.  “That money’s safe if I file chapter 7 now – right?”  “No doubt about it, I’ve been doing this for 40 years.”  Wrong.  That exemption applies only if the debtor has actually filed a Declaration of Homestead prepetition.  Gulp.

Client two had just sold their home.  They had $65,000 proceeds in the bank.  “That money’s safe if I file chapter 7 now – right?”  “No doubt about it, I’ve been doing this for 40 years.”  Wrong.  That exemption applies only if the debtor actually reinvests the proceeds in a new home within six months from the sale of the first.  The trustee can hold up the estate closing and wait for the reinvestment.  No reinvestment, the proceeds magically become not exempt at the end of the six months.  (I knew that one).

Client three still owned the home.  They wanted to file chapter 7, sell the home and use the $175,000 proceeds for retirement.  “We can do that – right?”  “No doubt about it, I’ve been doing this for 40 years.”  Wrong – sort of.  A secured creditor got relief from stay during the case and foreclosed.  The debtors got the $175,000 from the sale.  They did not reinvest it.  At the end of the six months, the trustee was there with his hand out.  The exemption applies again only if the debtor reinvests within six months.  This is actually a new 9th Circuit case, In re Jacobson.