Ninth Circuit to Hear Client's Challenge to Debtor's Homestead Exemption Claim
Updated: Oct 3, 2017
In California, as elsewhere, a debtor's claim to a homestead exemption is essentially a "holy cow." This office has now scrapped with two lower-court judges who, seemingly eager to avoid reversal, have allowed a homestead exemption where we think one should not have been allowed. The Ninth Circuit has now scheduled oral argument in our case for November 15, 2017. The decision to hold oral argument is encouraging; many cases are decided without oral argument. The case represents an opportunity for the Ninth Circuit to approve the BAP's 2016 holding that debtors claiming California exemptions have the burden of proof.
We hope the Ninth Circuit strikes a blow for the rule of law and dispels the widespread but erroneous belief that debtors are automatically entitled to the exemptions they claim. Our case may allow the Ninth Circuit to address some fundamental issues too frequently ignored by attorneys (and arguably even bankruptcy judges). First, the analysis must begin with a sound analysis of property law because a debtor cannot claim an exemption in property if the debtor did not have an interest in the property at the time the bankruptcy petition was filed. Second, even if there were such an interest, citing a state exemption statute is of no use if the statute would be unconstitutional as applied. Third, states create exemptions and may make them unavailable for misconduct or may limit exemption amounts..