BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
AB 1945 (Wieckowski)
As Amended March 28, 2014
Hearing Date: June 10, 2014
Fiscal: No
Urgency: No
TMW
SUBJECT
Enforcement of Money Judgments: Exemptions
DESCRIPTION
Existing law provides that the spouse of a judgment debtor may
claim a community property exemption from a judgment creditor's
enforcement of the money judgment against the debtor. This bill
would also authorize that exemption for a domestic partner of
the judgment debtor.
BACKGROUND
In a bankruptcy action, exemptions generally allow a person to
protect certain types of assets during the bankruptcy process.
If an asset is exempt, the asset can generally not be taken to
pay creditors' claims. These property exemptions are designed
to ensure that a debtor maintains the ability to support himself
or herself, as well as dependent family members, after the entry
of judgment, and also to facilitate the debtor's financial
recovery. Individuals filing bankruptcy in California can
choose between two different sets of exemptions: the 703
exemptions or the 704 exemptions.
The "703 exemptions," located in Code of Civil Procedure Section
703.140(b), consist of 11 categories that are modeled after
federal bankruptcy law. In comparison, the "704 exemptions,"
contained in Code of Civil Procedure Sections 704.010 through
704.210, provide 21 different types of exemptions that protect a
wider range of property. Additionally, the 703 exemptions are
specific exemptions that a bankruptcy debtor may elect in lieu
of all other exemptions while the 704 exemptions are available
(more)
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to all bankruptcy or nonbankruptcy debtors in California seeking
to exempt specified property from enforcement of a money
judgment.
Existing law authorizes the spouse of a judgment debtor to claim
a community property exemption from a judgment creditor's
enforcement of the money judgment against the debtor in a
bankruptcy action. This bill would also authorize that
exemption for a domestic partner of the judgment debtor.
CHANGES TO EXISTING LAW
Existing law provides that, except as otherwise provided by law,
all property of the judgment debtor is subject to enforcement of
a money judgment. (Code Civ. Proc. Sec. 695.010 (a).)
Existing law , the 704 exemptions, provides for 21 specific
exemptions that limit the enforceability of a money judgment
against a debtor's personal property, including motor vehicles,
residential improvement materials, jewelry, heirlooms, and works
of art, tools and implements used in the exercise of the
debtor's trade, business, or profession, public benefit
accounts, inmate trust funds, and unmatured life insurance
policies. (Code Civ. Proc. Sec. 704.010 et seq.)
Existing law , the 703 exemptions, makes 11 similar exemptions
available to debtors in personal bankruptcy proceedings. (Code
Civ. Proc. Sec. 703.140.)
Existing law provides that the 703 exemptions apply only to
property of a natural person, and may be claimed by any of the
following persons: (1) in all cases, by the judgment debtor or
a person acting on behalf of the judgment debtor; and (2) in the
case of community property, by the spouse of the judgment
debtor, whether or not the spouse is also a judgment debtor
under the judgment. (Code Civ. Proc. Sec. 703.020.)
Existing law provides for the creation of a legal entity called
a domestic partnership, wherein two adults have chosen to share
one another's lives in an intimate and committed relationship of
mutual caring. (Fam. Code Sec. 297.)
Existing law provides that registered domestic partners have the
same rights, protections, and benefits, and are subject to the
same responsibilities, obligations, and duties under law,
whether they derive from statutes, administrative regulations,
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court rules, government policies, common law, or any other
provisions or sources of law, as are granted to and imposed upon
spouses. (Fam. Code Sec. 297.5(a).)
This bill would provide that, in the case of community property
subject to the enforceability of a money judgment against a
debtor's property, the domestic partner of a judgment debtor may
claim a 703 exemption, whether or not the domestic partner is
also a judgment debtor under the judgment.
COMMENT
1. Stated need for the bill
The author writes:
The [United States] Bankruptcy Court of the Central District
of [California] examined in 2011 whether it was legal to
dismiss a homosexual married couple's joint bankruptcy filing
because they were homosexual. It held that [the federal
Defense of Marriage Act (DOMA)] violated the debtor's equal
protection rights afforded under the Fifth Amendment of the
United States Constitution, either under heightened scrutiny
or under rational basis review (In re Balas, 449 BR 567 (Case
No. 2:11-bk-17831 TD)). However, since the overturning of
DOMA by the Supreme Court, it is unclear whether domestic
partners may file for bankruptcy jointly.
AB 1945 makes clear that registered domestic partners can
claim property exemptions in a bankruptcy just as spouses in a
marriage can, regardless of whether the partners file jointly
or not. While state law says that registered domestic
partners have the same rights, protections and benefits as
spouses, it is unclear whether domestic partners can file
jointly in a bankruptcy. AB 1945 settles this issue.
2. Statutory clarification of domestic partner exemptions for
money judgments
This bill would provide that the domestic partner of a judgment
debtor may claim a community property exemption from a judgment
creditor's enforcement of the money judgment against the debtor.
The author argues that this bill is necessary to clarify the
existing uncertainty whether registered domestic partners can
jointly file for bankruptcy and claim the same property
exemptions as married couples.
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Under the federal Bankruptcy Code, states may either adopt the
federal exemptions listed in the Bankruptcy Code or opt out of
those exemptions and create different judgment exemptions. (See
11 U.S.C. Sec. 522(b)(1).) California has not authorized the
use of the exemptions in the federal Bankruptcy Code, so
California residents filing for bankruptcy are limited to the
exemptions allowable to California residents under nonbankruptcy
law. (See Code Civ. Proc. Sec. 703.130.)
By clarifying that the domestic partner of the judgment debtor
is authorized to claim an exemption, this bill would codify the
court's holding in In re Rabin (2006) 359 B.R. 242. In Rabin,
the domestic partner debtors argued that forcing domestic
partners to file separate bankruptcy petitions while allowing
only one combined homestead bankruptcy exemption pursuant to
California's spousal homestead exemption was inequitable. The
court held that "[b]ecause California has opted out of the
federal bankruptcy exemption scheme, residents who file
bankruptcy are limited to exemptions allowed under the state's
exemption scheme. Under California law, the homestead exemption
rights of registrations under the [California Domestic Partner
Rights and Responsibilities Act (DPRRA)] are identical to those
of people who are married, which is a single combined
exemption." (Id. at p. 249.) In codifying the Rabin court's
holding that domestic partners may claim the same judgment
exemptions as spouses, this bill eliminates any uncertainty that
domestic partners are to be treated equal to spouses in federal
bankruptcy cases brought in California.
It is important to note that this bill is limited in its reach
and can only clarify bankruptcy exemptions but cannot authorize
domestic partners to file a joint bankruptcy application. This
is because bankruptcy proceedings are established under federal
law, which provides who may file a single or joint application,
while state law specifies what type of exemptions the person may
claim against the money judgment. Federal law, 11 U.S.C. Sec.
302, provides that an individual and the individual's spouse may
file a joint petition. Under the Defense of Marriage Act
(DOMA), a spouse is a person of the opposite sex. Although the
Supreme Court has declared unconstitutional the application of
DOMA to a federal law that results in inequality for spouses of
the same sex, there has yet to be a determination that same-sex
domestic registered partners may be considered spouses with
equal protection under federal law. (See U.S. v. Windsor (2013)
133 S. Ct. 2675.)
The Rabin court noted that "Bankruptcy Code section 302 does
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indeed limit joint filings (and the payment of a single fee) to
married people as a matter of federal law; however, the language
of the statute suggests that there is no more than a presumption
that cases filed by spouses should be jointly administered,
which presumption may be overcome if the court determines that
joint administration should not take place. Moreover, as
occurred here, consolidation of cases brought by individuals who
are not spouses may also be ordered. In determining whether
cases of individual debtors should be consolidated, there is no
reason to suppose that bankruptcy courts would apply different
criteria based merely on the gender of the parties. This is
especially so where, as here, applicable state law actively
eliminates distinctions on that basis." (In re Rabin, supra,
359 B.R. 242, 247-248.)
Thus, while California law provides for domestic partnerships
and extends to those partnerships all rights and benefits
provided by state law to spouses, federal law does not expressly
provide for domestic partnerships. While this bill cannot
expand federal bankruptcy law to authorize a state domestic
partnership to file a joint bankruptcy application, it does
expand the use of exemptions to the domestic partner of the
judgment debtor. Although individuals in a domestic partnership
would have to initially file separate bankruptcy applications,
the Rabin court provides guidance to these individuals regarding
how the two cases could be jointly administered.
Support : None Known
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : AB 1853 (Wieckowski, 2014) would
remove the requirement that judgment debtors reinvest homestead
exemption money into another property within six months from the
date the home was sold, or else lose their judgment exemption
status, and would exempt benefits from matured life insurance
policies, including endowment and annuity policies, and vacation
credits or accrued or unused vacation pay. AB 1853 was held
under submission in the Assembly Committee on Appropriations.
Prior Legislation :
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AB 198 (Wieckowski, 2013) would have created additional new
categories of property exemptions available to debtors and would
raise the amount of the homestead exemption from between $75,000
and $175,000 to between $200,000 and $400,000. AB 198 was held
under submission in the Assembly Committee on Appropriations.
AB 929 (Wieckowski, Ch. 678, Stats. 2012) increased the dollar
amount of the exemptions for a debtor's interest in motor
vehicles, jewelry, professional books, and tools of the trade of
the debtor or the debtor's dependent, and also increased the
amount of the homestead exemption for persons 55 years of age or
older who meet specified low-income criteria.
AB 1046 (Anderson, Ch. 499, Stats. 2009) raised the amounts of a
debtor's homestead exemption by $25,000 in each available
category, establishing the current statutory levels of $75,000,
$150,000, and $175,000.
AB 182 (Harman, Ch. 379, Stats. 2003) raised the dollar amounts
a debtor may claim for exemptions from enforcement of a money
judgment and in bankruptcy actions.
SB 832 (Kopp, Ch. 196, Stats. 1995) raised the dollar amounts a
debtor may claim for exemptions from enforcement of a money
judgment and in bankruptcy actions.
AB 707 (McAlister, Ch. 1364, Stats. 1982) codified the
Enforcement of Judgments Law (Code Civ. Proc. Sec. 680.010 et
seq.), including the statutory dollar amount of personal
property exempted from the enforcement of monetary judgments.
Prior Vote :
Assembly Floor (Ayes 72, Noes 0)
Assembly Committee on Judiciary (Ayes 10, Noes 0)
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