BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 929
                                                                  Page  1

          Date of Hearing:   May 11, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                  AB 929 (Wieckowski) - As Amended:  March 31, 2011 

          Policy Committee:                              JudiciaryVote:8-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:               

           SUMMARY  

          This bill:

             1)   Revises and expands the set of bankruptcy exemptions 
               ("Section 703 exemptions") that a bankruptcy debtor may 
               elect in lieu of all other exemptions so that it more 
               closely corresponds to the broader set of all other 
               property exemptions ("Section 704 exemptions") generally 
               available to debtors in California seeking to exempt 
               specified property from enforcement of a money judgment.


             2)   Increases the amounts of the homestead exemption under 
               Section 704.730, as follows: (a) the base homestead 
               exemption from $75,000 to $150,000; (b) from $100,000 to 
               $250,000 for a married couple who resides in the homestead; 
               and (c) from $175,000 to $350,000 if the judgment debtor or 
               spouse who resides in the homestead is 65 years of age or 
               older, disabled, or 55 years of age or older with a limited 
               income.


           FISCAL EFFECT  

          Negligible fiscal impact.

           COMMENTS  

              1)   Background  . Both the federal Bankruptcy Code and 
               California law provide numerous exemptions that are 
               intended to save bankruptcy debtors and their families from 
               extreme hardship. California has chosen to opt-out of the 








                                                                  AB 929
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               federal exemption scheme, so California residents filing 
               for bankruptcy are limited to the exemptions afforded under 
               state law. Under state law, California bankruptcy debtors 
               have two sets of exemption options to choose from, one set 
               of state law non-bankruptcy exemptions ("Section 704 
               exemptions") and a second set modeled after federal 
               bankruptcy exemptions ("Section 703 exemptions"). The 
               debtor may choose only one set of exemptions, however.



            A comparison between these two sets of exemptions reveals that 
            the §704 exemptions are more numerous and better protect 
            debtors who own homes, because of the more generous homestead 
            exemption provided by Section 704.730 ($75,000 base level) as 
            compared to its counterpart under §703.140(b) ($17,425). 
            Section 704 exemptions are not limited to bankruptcy cases, 
            but are generally available to debtors in California seeking 
            to exempt certain property from enforcement of a money 
            judgment. On the other hand, some debtors may benefit more by 
            choosing the § 703 exemptions because of the unique 
            "wild-card" exemption (Section 703.140(b)(5)) that provides 
            flexibility to protect equity in a variety of property. If the 
            debtor is not a homeowner or does not wish to protect equity 
            in the home, the $17,425 exemption becomes a "wildcard" and 
            may be used to protect any of the debtor's property. In short, 
            the debtor often must choose between the larger homestead 
            exemption under the §704 slate, at the expense of flexibility 
            offered by the wildcard exemption under the §703 slate. 

              2)   Purpose  .  According to the author, an experienced 
               bankruptcy attorney, significant revisions to the Section 
               703.140(b) slate of exemptions are warranted to assist 
               bankruptcy debtors in California, especially in light of 
               the current mortgage crisis and poor economy. The author 
               states, "Considering the current dire situation with home 
               ownership and financial struggle in the state, assisting 
               debtors in recovering from hardship could not be timelier. 
               A person filing for bankruptcy who has a decent amount of 
               equity in his home would be wise to choose (the § 704 
               slate) because it affords more exemptions. Many people 
               however are in the unfortunate position of being 
               upside-down on their mortgages in that they paid more than 
               their home is now worth. There are also others who do not 
               own a home or have very little equity in their home. For 








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               these people, (the § 703 slate) is the appropriate 
               exemption statute, but both the categories of exemptions 
               and the quantity available for exemption are drastically 
               less. This bill would create a more even and fair § 703.140 
               so that it reflects (the § 704 slate) more closely and does 
               not strip a debtor of the essential items he needs to 
               recover from financial insolvency."

              3)   Homestead Exemption  . The purpose of the homestead 
               exemption is to allow judgment debtors to salvage at least 
               a portion of any equity that they may have built up in 
               their house. According to the author, this bill increases 
               the base homestead exemption to $150,000 because that 
               amount represents approximately half of the median home 
               price in California ($286,000) according to California 
               Association of Realtors' market data from March 2011.
                

             4)   Prior Legislation  : AB 1046 (Anderson)/Chapter 499 of 
               2009, increased the homestead exemption by $25,000 and 
               required the Judicial Council to adjust the exemption every 
               three years thereafter to account for inflation.

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081