9th Circuit Court of Appeal; Homestead Exemption

9th Circuit Court of Appeal; Homestead Exemption

BANKRUPTCY LAW (9th Circuit Court of Appeal; Homestead Exemption): The debtors had moved from Kansas to Arizona, and claimed the Arizona homestead exemption for their new residence. The Trustee objected, but was overruled. The Court of Appeal held that where the debtors (homeowners) claim the homestead exemption, it is up to the Trustee to prove why the exemption is inappropriate in the particular case. Because the Trustee did not show that the homeowners were eligible for Kansas exemptions, the bankruptcy court properly allowed the Arizona homestead exemption to apply to their case. (In re Mark Christian Schreiber and Deborah Jean Schreiber, Case No. 21-16028 [unpublished]; 9th Circuit, filed March 3, 2022).

Disclosure and the Pacific Ocean

Disclosure and the Pacific Ocean

Where the seller’s real estate broker failed to inform the seller that the next door neighbor had disclosed to the broker plans to build on the neighboring property, and therefore obstruct the seller’s Pacific Ocean view, and where after the sale, the buyer moved to rescind the transaction based on the loss of the ocean view, the Court of Appeal ruled that there was a question of fact regarding the broker’s failure to disclose the neighbor’s intent to build. There was a question of fact as to whether the broker breached his fiduciary duty to the seller. Summary judgment for the broker was reversed. Ryan v. Real Estate of the Pacific (2019) 32 Cal.App.5th 637, California Court of Appeal.

Community Property And Bankruptcy

Community Property And Bankruptcy

The Property received by one spouse from a third party during the marriage is presumed to be community property, unless there is a written document that shows that the community property interest of the other spouse was waived, making the item the separate property of the receiving spouse. The “title presumption” of Evidence Code Sec. 662 does not outweigh the “community property” presumption of Family Code Sec. 760, unless there is a written document showing that the community property presumption has been renounced or waived. In re Brace (2020) 9 Cal.5th 903 (2020), Supreme Court of California.

HOMESTEAD EXEMPTION: California Increases Protection

HOMESTEAD EXEMPTION: California Increases Protection

As of January 2021, California’s Homestead Exemption increases from a minimum of $300,000, to a maximum of $600,000. This means that many more homeowners in liquidation, Chapter 7 bankruptcy proceedings can keep their homes.
The California Civil Code will be amended as follows:
Sec. 704.730. (a) The amount of the homestead exemption is the greater of the following:
(1) The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000).
(2) Three hundred thousand dollars ($300,000).
(b) The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.
The statute does not say whether this will apply in bankruptcy as the “automatic homestead,” or whether the debtor must file a Declaration of Homestead. Based thereon, the debtor should strongly consider filing the Declaration with the County Recorder.

SCOTUS: Violating Bankruptcy Discharge Serves Up Creditor for Contempt

SCOTUS: Violating Bankruptcy Discharge Serves Up Creditor for Contempt

The primary purpose of the bankruptcy stay [11 USC Sec. 362] is to protect the debtor. (In re Fuel Oil Supply and Terminaling, Inc., 30 BR 360, 362 (Bankr.N.D.Tex.1983), cited in In re Globe Investment & Loan Co., Inc., 867 F.2d 556 (1989)). By stopping all collection actions against the debtor, the bankruptcy stay acts 1) as an injunction to preserve the estate, and 2) to prevent the creditors from trying to go around the bankruptcy process to collect.
Once the debtor receive the discharge (11 USC Sec. 727), creditors are no longer able to collect the discharged debts. A creditor who, despite the discharge, seeks to collect a pre-bankruptcy debt, runs the risk of a contempt citation and punishment by the federal court.
And so it was held recently by the US Supreme Court which held that a business dispute with the debtor, that had begun prior to the debtor’s filing for bankruptcy, was discharged by the bankruptcy, and no further collection activity would be allowed.
Writing for a unanimous US Supreme Court, Associate Justice Breyer opined that the business creditors, who had initiated the lawsuit against the debtor (Mr. Taggart) had no reasonable basis to believe that the bankruptcy stay, and the subsequent discharge would not act to bar the continued litigation against the debtor. The debt was considered wiped away, and the creditors actions, seen objectively, were not only impermissible, but gave rise to contempt sanctions:
“Under the fair ground of doubt standard, civil contempt therefore may be appropriate when the creditor violates a discharge order based on an objectively unreasonable understanding of the discharge order or the statutes that govern its scope.”
Taggart v. Lorenzen, ___ U.S. ___, 139 S.Ct. 1795, 1801, 204 L.Ed.2d 129 (2019).
The facts showed that the creditors had a working knowledge of the effects of bankruptcy law, and objectively should have realized that the pre-bankruptcy debt was no longer collectible. Therefore, the Supreme Court remanded the matter back to the 9th Circuit, to impose appropriate sanctions:
“We conclude that the Court of Appeals erred in applying a subjective standard for civil contempt. Based on the traditional principles that govern civil contempt, the proper standard is an objective one. A court may hold a creditor in civil contempt for violating a discharge order where there is not a “fair ground of doubt” as to whether the creditor’s conduct might be lawful under the discharge order.”
The Takeaway: Creditors Who Know that a Debtor has Filed for Bankruptcy Should Take No Action Against the Discharged Debtor, without First Having a Very Detailed, Careful Conversation with an Attorney, Lest Those Creditors End Up Held in Contempt!!

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