Court Rules on California’s Homestead and Wildcard Exemptions

Cielo y edificio en verano

The appellate court responsible for reviewing bankruptcy appeals in California recently handed down an opinion that raised some interesting points about homestead and wildcard exemptions. In that case, Ziegler v. Casey, the court looked what a man did with his homestead exemption and whether he would have to pay any of it back.

In 2013, a man filed for bankruptcy under California and federal bankruptcy laws. Fortunately for him, he had a great deal of equity in his home. During the course of his bankruptcy the man filed for a homestead exemption of $75,000, and nobody objected to this amount. Eventually, his home was sold, and the bankruptcy trustee transferred the $75,000 to the man. But homestead exemptions cannot be used for just anything a person wants. In fact, the law of exemptions can get quite complicated.

How Bankruptcy Exemptions Work

In a bankruptcy, a person, family, or company experiencing financial difficulties takes their case to court, and asks a judge to wipe out burdensome debt in exchange for a new start. As part of the process, the court will appoint a trustee who takes ownership of the person’s existing property. That property is sold and distributed among the creditors who are owed money, and it is done in an orderly fashion so no one party is unduly burdened by the excused debt.

While the trustee has enormous powers to distribute the property of someone declaring bankruptcy, there are exceptions to what can be distributed. For example, under California law a person filing for bankruptcy can ask the court to exempt a portion of equity in a home from being distributed by the trustee. This is known as the homestead exemption, and depending on the personal situation of the creditor, ranges from $75,000 to $175,000.

One caveat to this homestead exemption is how those funds are used if a home is sold and equity is retained by the person filing bankruptcy. Under California law, whatever amount a person exempts as homestead funds must be reinvested in a homestead within six months of the exemption being granted and becoming final. That is what got this person in this case in trouble.

Court Makes Man Payback Exemption Funds

In this case, the man received his $75,000 in homestead funds, but spent the money on several different things. Some of the money went to pay back a personal loan, rent, and other family expenditures. The trustee in this case waited until the six months was up, and then demanded an accounting of what happened to the money. Once it was shown that he did not spend the money on a new homestead, the court ruled that he had to pay it back.

The man appealed this decision, and asked that the court apply a portion of his homestead exemption under the wildcard exemption. This would allow him to claim that portion of the homestead exemption he had not exempted earlier. But the court denied this request, showing once again how complex bankruptcy laws are, and why it is so important to contact the right law firm when considering bankruptcy. At The Bankruptcy Law Center we have the experience your case deserves, contact us today.

 

(photo courtesy of Gustavo Belemmi)

How to File for Student Loan Bankruptcy | Bankruptcy Law Center

How to File for Student Loan Bankruptcy

In the United States, the average student loan debt is $32,731. Since 2016, the average amount of student loan debt has increased by 20%. Additionally, over 600,000 borrowers owe over [...]
Read more
How Many Types of Bankruptcy are There? | Bankruptcy Law Center

How Many Types of Bankruptcy are There?

There are six different types of bankruptcy under the United States Bankruptcy Code. The name of each type of bankruptcy is the chapter of the Bankruptcy Code, in which it [...]
Read more

See What Our Clients Have To Say

Yelp Review

Roger C.

I reached out to BLC to help assist with a chapter 7 business bankruptcy and they provided excellent guidance, advice, and support through the entire process. In my case an adversarial action was filed by one of the creditors and attorney Ahren Tiller and his staff provided sound ...arguments which prevailed. Couldn’t have found a more experienced and supportive team to represent me in a tricky situation. I would highly recommend them to anyone making the difficult but sometime necessary decision to find financial relief. Read more
Yelp Review

Justin R.

Like many others before and during the pandemic, life happenings caused me to be in a financial situation to warrant bankruptcy. The BLC was super professional all the way through the entire process. Right after I paid for my Bankruptcy, I got sick and had to have surgery and recovery. Then we ...were in full Pandemic mode. They were gracious to delay my filing until I was recovered and ready to file. I could not ask for more. The process was over all quick and painless for a simple Bankruptcy like mine. I feel a weight has been lifted and I can rebuild. Thank you for all your arduous work and patience, Gabriel, Ahren, and their teams are knowledgeable and efficient. Read more
Google Review

Katey Huntley

Responsive, friendly, kind, extremely easy to work with! So knowledgeable and made this entire process painless. Very grateful!

Google Review

Lynn Molina

Gabriel Hanna, Esq and the staff at BLC helped me in a very difficult time. I appreciate all the help and care they gave my case.

Google Review

Linda Cramer

I can’t say enough of how much this bankruptcy law firm helped me with my financial situation. They were all so helpful, efficient and made the difficult time and process as quick and easy as possible. I would recommend them to anyone I know and am glad to give my public recommendation as well. T...hey truly deserve a five star plus rating. Read more
Yelp Review

Andrea N.

I am very happy with my experience with BLC. Bankruptcy is not something anyone wants to go through, however everyone at BLC made my experience pleasant and easy. The process was explained thoroughly and I had an easy time reaching out and connecting with my attorney. Anika Renaud-Kim was my attorney ...and she was nothing short of amazing! She was very patient and generous with her time. Ms. Renaud-Kim definitely made me feel at ease and comfortable through the entire process. Read more
Facebook Review

Lidia Paramore

they did a great job for me, helped me anytime I needed something, my Lawyer Gabriel Hanna is the best, gave lots of confidence all the time..thanks BLC I will.always recommend you, I’m very grateful for your service!!!

Yelp Review

Rachael C.

When searching for information I had called a few different firms and received consults. BLC was the only one who didn’t shy away and provided answers and information during the consult. Once I agreed to move forward, they were supportive, informative, and eased my anxiety through the whole process.... I can’t recommend them enough. Read more
Google Review

Emily Martinez

AmazingI had many questions and uncertainties and the carefully explained it all and made it easy to understand. They facilitated a fast and easy process making this scary difficult thing simple

Ready To Eliminate Your Debt?

Bankruptcy is still the best option. Other debt plans make promises, but only bankruptcy delivers.

FREE CASE EVALUATION 

Logo

SAN DIEGO OFFICE

1230 Columbia St. #1100 San Diego, CA 92101

LOS ANGELES OFFICE

11500 Olympic Blvd., 4th Floor Los Angeles, CA 90064

VISTA OFFICE

380 South Melrose Drive #300 Vista, CA 92081
© 2022 Bankruptcy Attorneys. All Right Reserved.

Legal Disclaimer: The Bankruptcy Law Center is a California Licensed law firm with attorneys licensed in the state of CA, NY. Attorney Ahren Tiller is responsible for this advertisement. Bankruptcy Law Center’s principal office is located at 1230 Columbia st. Suite 850 San Diego, CA 92101. Prior results listed on this site do not depict or in any way infer a prediction or outcome.We are a debt relief agency proudly providing options to people with financial problems. View our Privacy Policy