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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Rachael Anne Earl, 

Appellant, 

v. 

Lund Cadillac LLC, et al., 

Appellees. 

No. CV-15-01693-PHX-SMM

BK No. 2:13-BK-18751-EPB 

ORDER 

 Appellant Rachael Anne Earl (“Debtor”) appeals an Order from the United States 

Bankruptcy Court granting Appellees’ objection to debtor’s claimed homestead 

exemption. (Docs. 1; 8.) Appellees Lund Cadillac, Diane Mann (“Trustee”), and Wells 

Fargo Bank ask the Court to affirm the Bankruptcy Court’s decision. (Doc. 11.) The 

appeal is fully briefed. (Docs. 11; 13.) For the reasons set forth below, the Court will 

affirm the Bankruptcy Court’s decision. 

I. BACKGROUND 

 On October 28, 2013, Debtor, acting pro se, filed for Chapter 13 bankruptcy 

relief.1

 (Bk. Doc. 1.)2 The case was ultimately converted to a Chapter 7 on March 24, 

2014, because Debtor’s proposed plan was insufficient to compensate creditors. (Bk. 

Doc. 34.) At this time, Debtor obtained counsel to proceed with the case. 

 

1

 This was Debtor’s third Chapter 13 bankruptcy case since 2010. See Case Nos. 

2:10-bk-05650-RJH and 2:10-bk-27333-SSC. 

2

 Connotes Bankruptcy Court docket. 

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 On her first Schedule A, Debtor listed ownership of two properties: one on 

Claiborne Avenue and another on Sunnyvale Avenue, both single family residences 

located in Gilbert, Arizona. (Bk. Doc. 20.) At the time of filing for bankruptcy, Debtor, 

her husband, and their four children resided in the Claiborne property. On her first 

Schedule C, Debtor claimed a homestead exemption to the Claiborne property. (Id.) 

However, Debtor did not have title to the Claiborne property as it had previously been 

sold in a trustee’s sale. Debtor attempted to get the trustee’s sale set aside, but ultimately 

failed. (Bk. Doc. 83.) 

 Debtor bought the Sunnyvale property in May 2002 and lived there with her 

family for a few years until they moved to the Claiborne property. Debtor retained 

ownership of the Sunnyvale property, and at the time she filed her petition had been 

renting the Sunnyvale property out to third-party tenants for over four years. 

 In August 2014, ten months after filing for bankruptcy, Debtor filed a notice of 

change of address to the Sunnyvale property. (Bk. Doc. 71.) Subsequently, Trustee filed a 

Notice of Trustee’s Sale on the Sunnyvale property. In December 2014, before the 

scheduled sale date of the Sunnyvale property, Debtor amended her bankruptcy schedules 

and changed her homestead exemption to the Sunnyvale property. (Bk. Doc. 81.) In those 

amended schedules, however, Debtor still indicated that all her exempted personal 

property was located at the Claiborne property. (Id.) Appellee Lund Cadillac objected to 

the amendment. (Bk. Doc. 88.) The Bankruptcy Court held an evidentiary hearing on the 

matter and ultimately sustained the objection. (Bk. Doc. 125). Debtor subsequently filed 

the present appeal. 

II. STANDARD OF REVIEW 

 A party may appeal a Bankruptcy Court’s Order to the District Court if the Order 

is final and binding. 28 U.S.C. § 158(a). An appellant may choose between a Bankruptcy 

Appellate Panel, if one exists in the Circuit, and a District Court to hear its appeal. 28 

U.S.C. § 158(c). Thus, this Court has appellate jurisdiction to review all final and binding 

Orders issued by the Bankruptcy Court. In ultimately resolving the substance of the 

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appeal, the Court will review the Bankruptcy Court’s conclusions of law de novo and its 

findings of fact under a clearly erroneous standard. See Fed R. Bankr. P. 8013; Wegner v. 

Murphy (In re Wegner), 839 F.2d 533, 536 (9th Cir. 1988) (citing Pizza of Hawaii, Inc. v. 

Shakey’s, Inc. (In re Pizza of Hawaii, Inc.), 761 F.2d 1374, 1377 (9th Cir. 1985)). In its 

appellate capacity, the Court is typically bound to review the evidence on record in the 

light most favorable to the prevailing party below. In re Jake’s Granite Supplies, LLC, 

442 B.R. 694, 698-99 (D. Ariz. 2010).

III. DISCUSSION 

The distinct issue the Court must consider on appeal is whether, during 

administration of a debtor’s bankruptcy estate, the debtor may amend her homestead 

exemption to a different property, and whether other circumstances could preclude such 

an amendment. 

 When she filed her amended schedules, Debtor relied on Rule 1009 of the Federal 

Bankruptcy Code which provides that a “schedule . . . may be amended by the debtor as a 

matter of course at any time before the case is closed.” (Bk. Doc. 96 (citing 

Fed.R.Bank.P. 1009).) Debtor argued that the substitution of the Sunnyvale property is an 

absolute right under federal bankruptcy law. (Id.) Appellee Lund Cadillac objected to the 

amended exemption based on provisions found in the Arizona homestead exemption 

statute, A.R.S. § 33-1101, et seq., as well as long established Supreme Court case law. 

(Bk. Doc. 88 (citing White v. Stump, 266 U.S. 310 (1924) (holding that exemptions are 

determined as of the date of the filing of the petition).) Appellee contended that the right 

to amend bankruptcy schedules is not absolute, but rather the right can be precluded by 

individual state laws governing exemptions. (Id.) 

 In denying Debtor’s attempt to change her homestead exemption to the Sunnyvale 

property, the Bankruptcy Court relied on two guiding principles. First, “that a homestead 

exemption is determined as of the petition date.” (Id. at 4 (citing In re Jacobson, 676 F.3d 

1193 (9th Cir. 2012), and White, 266 U.S. at 310.) Second, “that a debtor may amend his 

or her schedules to claim or change an exemption” at any time. (Id. (citing Fed. R. Bankr. 

P. 1009).) The Bankruptcy Court reconciled these two principles, which are seemingly at 

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odds, and found that a court must “recognize any homestead exemption claimed in an 

amended Schedule C that could have been legitimately claimed under state law as of the 

petition date.” (Id. (emphasis in the original).) Next, the Bankruptcy Court turned to the 

Arizona homestead statute, A.R.S. § 33-1101, which authorizes a debtor to assert a 

homestead exemption only in a home in which he or she resides on the bankruptcy 

petition filing date. (Id. at 5.) Because Debtor resided in the Claiborne property on the 

date she filed her petition, and showed no intentions of residing in the Sunnyvale 

property because she was then currently renting it out to a third party, the Bankruptcy 

Court ultimately held that Debtor was precluded from amending her homestead 

exemption to the Sunnyvale property. (Id. at 5-7.) The Bankruptcy Court found that 

“Debtor is not permitted to elect what amounts to a de facto alternative exemption” or a 

“second bite at the apple” after she failed to set aside the Claiborne property sale. (Id. at 

6.) Thus, the Bankruptcy Court sustained Appellee’s objection. 

 On appeal, Debtor argues that the lower court’s decision rested upon too narrow of 

an interpretation of the relevant case law and Arizona’s homestead statute. Debtor argues 

that she “had the absolute right to assert her homestead exemption at any time ‘up to the 

hour of sale.’” (Doc. 8 at 16 (citing First Nat’l Bank of Mesa v. Reeves, 27 Ariz. 508, 

516, 234 P. 556, 559 (1925).) Debtor cites numerous other cases that she claims stand for 

this proposition. See e.g., Schultz v. Mastrangelo, 333 F.2d 278 (9th Cir. 1964) (finding 

that Debtors could retain their homestead under Arizona law though they recorded their 

declaration after filing their petition in bankruptcy); In re Smith, 515 B.R. 755 (Bankr. 

Ariz. 2014) (holding that Debtors could sell their Arizona homestead exempted property 

and use the proceeds to reinvest in a residence in Utah pursuant to A.R.S. § 33-1101(c)); 

In re Elia, 198 B.R. 588 (Bankr. Ariz. 1996) (holding that Debtor could assert her 

homestead exemption in property acquired post-petition with the proceeds from her 

previous homestead property she sold); Rogone v. Correia, 236 Ariz. 43, 50, 335 P.3d 

1122, 1129 (App. 2014) (“A Debtor may, however, declare a homestead at any time prior 

to sale, and may designate the property to which the exemption will apply if she owns 

more than one.”). The Court disagrees with Debtor’s assertions. Those cases analyzed 

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distinct issues other than the one currently before Court in this case. As such, they are not 

dispositive as Debtor contends. (Doc. 8 at 18.) 

 Although the Court must review the Bankruptcy Court’s conclusions of law de 

novo, after reviewing relevant case law and Arizona statutes the Court agrees with the 

lower court’s findings. The Court first looks to the statute’s language as the best indicator 

of the legislature’s intent. Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co, 177 Ariz. 526, 

529, 869 P.2d 500, 503 (1994). “The Arizona homestead statute is not ambiguous.” First 

Nat’l Bank of Doña Ana Cnty. v. Boyd, 378 F.Supp. 961, 964 (D. Ariz. 1974). 

 The applicable Arizona homestead exemption provides that: 

Any person the age of eighteen or over, married or single, who resides 

within the state may hold as a homestead exempt from attachment, 

execution and forced sale, not exceeding one hundred fifty thousand dollars 

in value, any one of the following . . . [t]he person's interest in real property 

in one compact body upon which exists a dwelling house in which the 

person resides. 

A.R.S. § 33-1101(A). “Only one homestead exemption may be held by a married couple 

or a single person under this section.” Id. at § 33-1101(B). Fed. R. Bankr. P. 1009 

provides: “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.” Id. Court approval is 

not required to make an amendment. In re Michael, 163 F.3d 526, 529 (9th Cir. 1998). 

However, the right to amend is not absolute and is subject to certain limitations, such as 

those found in the Arizona exemption laws. It has long been established that “[u]nder the 

so-called ‘snapshot’ rule, bankruptcy exemptions are fixed at the time of the bankruptcy 

petition.” In re Jacobson, 676 F.3d at 1199 (quoting White, 266 U.S. at 313). “It is 

[when] the bankruptcy proceeding is initiated, that the hands of the bankrupt and of his 

creditors are stayed and . . . the bankrupt’s right to control and dispose of the estate 

terminates . . . save only as to property which is exempt.” White, 266 U.S. at 313 

(internal quotations omitted). 

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 Taken together, the Court finds that these principles stand for the proposition that 

in Arizona a debtor cannot amend her homestead exemption in another piece of property 

if she was not able to legally claim a homestead exemption in that property on the 

petition date. Or in other words, a debtor can only amend her homestead exemption postpetition if on the petition date the debtor could have legally claimed an exemption for the 

property in question. 

 Here, application of the above proposition shows that Debtor could not lawfully 

amend her homestead exemption to the Sunnyvale property post-petition. When Debtor 

first filed her petition on October 28, 2013, she was living with her family in the 

Claiborne property. In her original schedules, she claimed a homestead exemption in the 

Claiborne property. All of her belongings were kept in the Claiborne property. Debtor 

was not residing in the Sunnyvale property, but rather was then renting it out to a thirdparty tenant. This “snapshot” of the facts as they existed on the petition date shows that 

Debtor only intended to reside in the Claiborne property. As such, the Court finds that 

this is the only property she could legally claim a homestead exemption for. 

 The record shows that Debtor did not develop an intention to reside in the 

Sunnyvale property until after she failed to get the sale of the Claiborne property set 

aside. In fact, Debtor had not resided in the Sunnyvale property for more than four years, 

and had technically “abandoned” it as a homestead. See A.R.S. 33-1104(A)(3) (“A 

claimant may remove from the homestead for up to two years without an abandonment or 

waiver of the exemption.”); In re Calderon, 507 B.R. 724, 732 (9th Cir. BAP 2014) (“this 

sentence also could be read in isolation to mean that, after two years living elsewhere, 

debtors are deemed to have automatically abandoned their homesteads.”). Debtor has 

presented no evidence to overcome the presumption that she abandoned the Sunnyvale 

property as her potential homestead. Therefore, based on these additional grounds, this 

Court agrees with the Bankruptcy Court that Debtor’s post-petition amendment to her 

homestead exemption to the Sunnyvale property was ineffectual as a matter of law. 

 When viewed in their entirety, the Arizona homestead exemption laws support this 

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finding. Nowhere in the statutes is there express language authorizing a debtor to amend 

her exemption post-petition. See A.R.S. §§ 33-1101 through 33-1105. Rather, the statutes 

show that the legislature provided that a debtor may only claim one homestead 

exemption, which will persist through the remainder of the bankruptcy proceeding 

regardless of subsequent developments. 

 For example, A.R.S. § 33-1102 provides that “[i]f a person has more than one 

property interest to which a homestead exemption may reasonably apply, a creditor may 

require the person to designate which property, if any, is protected by the homestead 

exemption.” Id. Thus, the legislature contemplated the scenario wherein a debtor had 

interest and could potentially claim a homestead exemption in more than one property 

upon filing for bankruptcy. In such an event, in order to avoid confusion and 

complications during the course of a bankruptcy proceeding, the statute provides a 

remedy whereby a creditor can force a debtor to elect one, and only one, exempted 

homestead property. The statute is silent on whether a debtor with multiple property 

interests can change her exemption post-petition. 

 Additionally, A.R.S. § 33-1101(C) provides that: 

The homestead exemption, not exceeding [$150,000], automatically 

attaches to the person’s interest in identifiable cash proceeds from the 

voluntary or involuntary sale of the property. The homestead exemption in 

identifiable cash proceeds continues for eighteen months after the date of 

the sale of the property or until the person establishes a new homestead 

with the proceeds, whichever period is shorter. Only one homestead 

exemption at a time may be held by a person under this section. 

Id. (emphasis added). Again, Arizona law addresses another likely scenario: a debtor 

selling her exempted homestead post-petition. The statute provides that a debtor must 

reinvest the proceeds in a new residence within eighteen months or risk forfeiture. Id. By 

requiring a debtor to reinvest the proceeds in what will become the new exempted 

homestead, the statute expressly prohibits a debtor from selling an exempted homestead, 

pocketing the proceeds, and then claiming a new exemption in another piece of property. 

 Although the homestead statutes should be liberally construed to effect their 

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purpose of protecting the homeowner from the forced sale of her home, the homestead 

statutes simply do not allow for a debtor to amend her homestead exemption to a property 

she could not properly claim as a homestead on the petition date. See Matcha v. Winn,

131 Ariz. 115, 117, 638 P.2d 1361, 1363 (App. 1981). Thus, after reviewing the 

Bankruptcy Court’s findings of fact for clear error and findings of law de novo, the Court 

affirms the Bankruptcy Court’s decision to sustain Appellee’s objection. 

IV. CONCLUSION 

Accordingly, based on the foregoing,

 IT IS HEREBY ORDERED AFFIRMING the Bankruptcy Court’s Order in 

favor of Appellees. (Doc. 1.) 

IT IS FURTHER ORDERED that the Clerk of Court shall forward a copy of this 

Order to the Chambers of U.S. Bankruptcy Judge Eddward P. Ballinger, U.S. Bankruptcy 

Court for the District of Arizona, 230 N. First Avenue, Phoenix, AZ 85003. 

IT IS FURTHER ORDERED that the Clerk of Court shall terminate and remand 

this case to the Bankruptcy Court for further proceedings. 

 Dated this 4th day of August, 2016. 

Honorable Stephen M. McNamee

Senior United States District Judge

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