June 19, 2013
Dear constituency list members of the Insolvency Law Committee (“ILC”), the following is a legislative summary of interest to insolvency practitioners and professionals:
California Assembly Bill AB 929 became effective on January 1, 2013, increasing personal property exemptions under California Code of Civil Procedure (“CCP”) sections 703 and 704 and impacting the homestead exemption as set forth below:
Under AB 182 (2003), a bill developed through coordination between the California Law Revision Commission and the Insolvency Law Committee, the process of increasing exemptions as to personal property under CCP §703.140, the so-called “wild card” set of exemptions, was removed from the political process through application of a first-of-its kind automatic triennial cost-of-living adjustment set by the annual California Consumer Price Index to keep pace with inflation. See CCP §703.150. Increases in the homestead exemption in real property were not part of this automatic adjustment process.
AB 929, a bill sponsored by Assemblyman Bob Wieckowski, a long-time member of the National Association of Consumer Bankruptcy Attorneys, finally ties the homestead exemption to inflation and the increasing cost of home ownership. On April 1, 2013 (and every three years thereafter) the Judicial Council is required to submit adjusted homestead exemptions based on the change in the annual California Consumer Price Index to the Legislature.
AB 929 modifies CCP §704.730 so that the maximum income threshold is increased (from $15,000 to $25,000 if single and from $20,000 to $35,000 if married) for persons 55+ years of age to be eligible for the $175,000 homestead exemption.
AB 929 also revises and recasts the “wild card” set of exemptions so that their language generally mirrors the corresponding CCP section 704 “homestead” set of exemptions for various assets and increases the dollar amount of the exemption for a debtor’s interest in motor vehicles, household furnishings, jewelry, and tools/professional equipment. The amounts under CCP 703.140(b) were further adjusted effective April 1, 2013 based on the change in the annual Consumer Price Index for All Urban Consumers for the most recent three-year period. The following lists certain dollar amounts of exemptions under CCP 703.140(b):
Property
Old Amount
New Amount (for Petitions filed from 1/1/13 – 3/31/13)
New Amount (for Petitions filed on or after 4/1/13
Homestead (CCP §703.140(b)(1))
$22,075
$24,060
$25,575
Motor Vehicles (CCP §703.140(b)(2))
$3,525
$4,800
$5,100
Household Items, animals, crops, musical instruments (CCP §703.140(b)(3))
$550
$600
$650
Jewelry (CCP §703.140(b)(4))
$1,425
$1,425 (no change)
$1,525
Wildcard (CCP §703.140(b)(5))
$1,175
$1,280
$1,350
Tools of Trade ((CCP §703.140(b)(6))
$2,200
$7,175
$7,625
Life Insurance (CCP §703.140(b)(8))
$11,800
$12,860
$13,675
Personal Injury ((CCP §703.140(b)(11)(D))
$22,075
$24,060
$25,575
Finally, certain other changes were made to CCP § 703.140. First, under CCP §703.140(b)(11)(D), the exclusion for pain, suffering and actual pecuniary loss for the personal injury exemption is eliminated. Second, under CCP §703.140(b)(2), the motor vehicle exemption is expanded to include one or more vehicles (i.e. previously only one vehicle could be exempted).
These materials were prepared by Dore Law, in San Francisco, California. Editorial contributions were provided by ILC member Monique Jewett-Brewster, of Bryan Cave, LLP, in San Francisco, California and ILC Advisor Robert G. Harris of Binder & Malter, LLP in Santa Clara, California.
Thank you for your continued support of the Committee.
Best regards,
Insolvency Law Committee
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With regard to the exemptions applicable if no homestead is claimed, CCP section 703.104(b), the bill does not increase the wildcard, per se, but does increase other provisions and also creates new exemptions such that the total amount exemptible has now increased substantially. . The stated purpose of these amendments is to conform the CCP Section 703.140(b) exemptions to the CCP Section 704.010 et seq. exemptions to protect those without homes in the event they file for bankruptcy protection. While the language of the changes to the CCP Section 703.140(b) exemptions would appear to parallel the CCP Section 704.010 et seq. exemptions, the amounts are not the same. The exemptions available under CCP Section 703.140(b) are substantially higher than those in CCP Section 704.010 et seq.