Opinion ID: 778601
Heading Depth: 3
Heading Rank: 1

Heading: The California Homestead Exemption in Federal Bankruptcy Law

Text: 10 Federal bankruptcy laws provide debtors with various exemptions, which exclude certain property from the bankruptcy estate. Kendall v. Pladson (In re Pladson), 35 F.3d 462, 464 (9th Cir.1994); 11 U.S.C. § 522(d). Pursuant to 11 U.S.C. § 522(b)(1), California opted out of the federal exemptions and enacted its own exemptions. CCP § 703.130; Little v. Reaves (In re Reaves), 285 F.3d 1152, 1155 (9th Cir.2002). 11 A California debtor in bankruptcy must elect between two sets of exemptions under California law, one which applies to debtors generally and the other which applies to debtors in bankruptcy. CCP § 703.140(a); Farrar v. McKown (In re McKown), 203 F.3d 1188, 1189 (9th Cir. 2000). The homestead exemption available to judgment debtors, CCP § 704.730, is more generous than the exemption that applies to debtors in bankruptcy, id. § 703.140(b)(1). Here, prior to filing for bankruptcy, Debtors recorded a declaration of homestead available to judgment debtors, thereby entitling Debtors to a $75,000 homestead exemption, id. § 704.730(a), which remained effective after they filed their bankruptcy petition. 2 12 After filing for bankruptcy, Debtors sought to avoid Wolfson's judgment lien pursuant to 11 U.S.C. § 522(f) on the ground that it impaired their homestead exemption. To determine whether or to what extent Wolfson's judgment lien could be avoided under § 522(f) because it impaired Debtors' state-law homestead exemption, the bankruptcy court had to (1) apply California law to determine whether Wolfson's lien attached to Debtors' residence, and (2) if the lien attached, determine under federal bankruptcy law whether or to what extent the lien impaired Debtors' homestead exemption. See Wiget v. Nielsen ( In re Nielsen ), 197 B.R. 665, 667-68 (B.A.P. 9th Cir.1996); see also Bank of Am. Nat'l Trust & Sav. Ass'n v. Hanger (In re Hanger), 217 B.R. 592, 594-95 (B.A.P. 9th Cir.1997) (holding that the bankruptcy court must determine the extent to which a lien impairs the exemption and that only that amount must be avoided). We address only the first inquiry here. 13