BILL ANALYSIS �
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