means test for chapter 7 bankruptcy

Bankruptcy Means Test: a calculator, and a trick to pass (2023)

Posted by Hale Andrew Antico on

Bankruptcy Means Test for Chapter 7 in California, and Everywhere Else

Bankruptcy means test for Chapter 7 was created by Congress to decide if you qualify for liquidation or straight bankruptcy. Here is what it is, some answers to common bankruptcy means test questions, and a weird tip on passing the bankruptcy means test and its median income limits (ok, it’s not weird, but I think you’ll find it helpful).

Historically, there was no bankruptcy income limit

Before 2005, any income earner could, in theory, file Chapter 7 bankruptcy. There was a time in those days where a single person filing bankruptcy could earn $8,000 a month after taxes and still get a discharge. The credit card companies lobbied Congress to change the law and make it harder to qualify. In response, Congress passed a bankruptcy reform called BAPCPA in 2005. One of the new provisions was to add a means test so that the more someone earned, the harder it became to qualify for Chapter 7.

What is the Bankruptcy Means Test

The bankruptcy means test is a long form that asks how much money someone has earned recently. It starts by determining a) what your “current monthly income” is. Then, it compares that to b) a median income limit for their state, for a similar-sized household. If your income is less than the magic number, you pass the means test for Chapter 7. Consequently, you can file bankruptcy that way.

Figuring Your Current Monthly Income

Once you’ve figured out which income limit number is the standard for your state, you now need to compare against it your current monthly income. And like most things in bankruptcy, this is not as straightforward as it seems.

What is Current Monthly Income on the Bankruptcy Means Test?

How do you calculate current monthly income? Let’s start by saying what it’s not.

Current Monthly Income is Not

Current monthly income is not your current income, as reflected from your most recent paystub. Now, that might not make much sense, but this is law, and bankruptcy law, to boot.

It’s also not what you put on your most recent tax return. While that is helpful information, and your bankruptcy attorney will want that for different reasons, the tax return actually has no place on the means test.

Current Monthly Income is

Put simply, the current monthly income is the average of all the income you’ve earned the past six months. Note the word “all” before income. It’s not just the gross income from your paychecks.

It also counts most government benefits, bonuses you got from work, commissions, overtime, tips, and all those other deposits from Zelle and Paypal on your bank statements (speaking of which, see my list of 12 crucial tips to do before filing bankruptcy).

But I don’t get to keep my gross income before taxes

Notice that above I used the word “gross income” from your paycheck. You might think it’s not fair that they’re counting all the money you earned before Uncle Sam takes his cut with taxes and other payroll deductions.

But that is the way Congress wrote the law, and the form. “Your gross wages” are literally the first words used when it’s time to input numbers on the bankruptcy means test. Don’t worry: there’s a place where we get to subtract taxes later if you earn “too much.”

Check out our ultimate
Chapter 7 bankruptcy guide

Chapter 7 Guide

Your State’s Median Income

bankruptcy means test for chapter 7
A bankruptcy attorney can skillfully complete the bankruptcy means test for chapter 7.

I use the bankruptcy means test for California, because that’s where I am. If you’re someone else, you’ll use a bankruptcy means test calculator or complete it for your state. (and see below for a link to my simple California bankruptcy means test calculator).

You ask, “what number do I compare my income against?” The short answer is, the income limit for Chapter 7 is the median income for your state based on your household size. This is a number that changes from state to state, from time to time, and is based on the overall economy.

For cases filed after November 2022, the annual median income numbers are in a spreadsheet compiled by the Department of Justice Means Testing. In looking at the California median income, the annual one-person household median income now exceeds $60,000. You can read the specific and updated California median income limits that should be in use at least until the middle of 2023.

Miscellaneous Bankruptcy Means Test Factoids and FAQ

Does means test income count just me, or my spouse also?

This comes up all the time. A couple is married, but only one of them is filing bankruptcy. This is where community property comes in. California Family Code Section 760 says that everything acquired by one spouse during the marriage is the property of both. Or put differently, both spouses’ paychecks, even though it has each name on it and maybe the other can’t spend it, is counted in the current monthly income of both spouses. This is regardless of which spouse files bankruptcy.

Now, it’s true that your spouse doesn’t have to file bankruptcy with you. But even if they aren’t, the chances are very strong that your spouse’s income will count also. And this counts not just your spouse’s pay, but presumably all income from any source, including businesses and that Amazon or Etsy storefront.

If I earn more than the California median income, does that mean I don’t qualify?

Let’s say you’ve gone back and looked at every single paystub for the last six complete months. You counted all the overtime. You calculated that bonus, and you’ve input that insurance check and those DraftKings winnings. You annualize the number and you’re over the California median income for your household size (or your own state). If you’re over the line, you could still qualify for Chapter 7 bankruptcy.

Just because you earn a smidge more than the median income limit for the means test doesn’t mean it’s game over. It just means that you need to do the second part of the bankruptcy means test. This is the part where you get to subtract some of your payroll deductions. It’s a combination of a) actual things you pay; and b) ‘standard deductions’ you get to subtract (regardless of what you actually spend).

For example, federal and state taxes get backed out; voluntary retirement doesn’t. What you actually spend on health insurance counts; a set amount for rent and clothes is given to you regardless of what you actually spend.

Explaining all the dozens of line-items of deductions is beyond the scope of this document. However, at the end of ten pages or so of taking things away from your gross pay and current monthly income, we reach disposable income.

It’s possible that your current monthly income is over the state median income limit, but that your disposable income is low enough to still qualify for Chapter 7 bankruptcy.

Learn about the median income limits
used to qualify for Chapter 7 bankruptcy
and try our Means Test Calculator

Median Income

So Do I Qualify for Chapter 7

It’s common to wonder “Do I qualify for Chapter 7” since not everyone does. It’s really a two-step process. Firstly, do you earn under the median income limit for your state and household size. Secondly, if you don’t, is there enough to pull you back under. And thirdly, can you actually afford to repay some of your debt. This may all sound simple, but as you’ll see, there’s a lot of gray to consider. Just like it’s not really a two-step process.

Note: If you’ve researched bankruptcy information, and the types of bankruptcies, you may have read that Chapter 7 bankruptcy is a faster, cheaper option to discharge debt. It’s not always better.

Will I qualify for Chapter 7 if I earn more than the median?

It’s common to wonder “Do I qualify for Chapter 7” even if you earn more than the median. Don’t panic, even if you earn more than the median income for your state and household size. It’s possible that you may still qualify for Chapter 7. The rest of the bankruptcy Means Test massive form requires a series of numbers filled in for expenses. In some cases, these monthly expense are what you truly spend. In others, it requires some standard expense number put out by the Internal Revenue Service. If you spend more than the IRS allowance, that doesn’t count. However, if done properly by a skilled bankruptcy attorney, it can still be possible to be eligible for Chapter 7 even if you make more than the median income.

Allowable expenses in the means test

It can be disappointing to learn that some real-life expenses don’t count in the bankruptcy means test. For example, there’s no box in which to put your fantasy football pool, or your season tickets to the Lakers (or opera). More realistically, we have no box for that money you send to your ex but it’s not court-ordered support.

There is a box for food and clothes, but you get what the government averages give you, and that’s all. If you spend more than that, you’ve got an uphill battle ahead to prove why that should be allowable. An experienced bankruptcy lawyer will get to know you and your situation, and maybe think of a box that is a good fit for an expense that you may not have considered.

Household Size and the Means Test

Household size is a key component in the bankruptcy means test. It’s possible to pass the means test with a larger number, but not be under the income limit with a smaller household size. How many to use for isn’t always clear. For example, if you live with roommates, do you count their income as “heads on beds” even though they live in your home but you can’t access their income? Or if you have 3 kids you help support (one adult away at college, another adult working part-time living at home, and another under 18 but your ex shares custody), is your household size 1, 2, 3 or 4? These are very fact-specific determinations; there is no set answer. Contact a bankruptcy attorney to guide you through the means test.

The One Weird Trick to Passing the Means Test

Here it is. One weird trick to getting under the median income limit and passing the means test. And in a word, this is it: timing. In general, maybe you can’t control your pay, you can’t control your income, you can’t turn down overtime. But unless a creditor is about to garnish or foreclose or some other terrible thing, what you can control is when you file bankruptcy. And that has consequences… one of which could be positive if your goal is to get under the limit and file Chapter 7.

An Online Bankruptcy Means Test Calculator Says I Don’t Qualify

This lawyer will want to complete the means test

First of all, don’t buy into those online bankruptcy means test calculators. I won’t, even if you swear it’s accurate. They’re not always spot-on, and every penny counts. Even if the means test calculator is using the correct California median income limits (or wherever), chances are that you didn’t input your FICA deductions, state income tax, (and others) for each paycheck. In the real world, that’s what we have to do. It never hurts to double-check. In fact, I’ll insist upon it.

So, I will want to manually input all the numbers myself to be certain if you. There are lots of nuances a skilled bankruptcy lawyer can discern. It’s quite possible that after an experienced professional completes the means test you may pass where you thought you didn’t.

Still, maybe after we plug in all the numbers, you don’t qualify for Chapter 7. No matter how skillfully done, it just might be the truth that you don’t meet the eligibility for the bankruptcy means test for Chapter 7 right now.

Timing is everything.

The good news is that someone who isn’t eligible for Chapter 7 now might qualify in the future. Heck, it’s possible you didn’t pass this month, but may next month. There is a strategy in timing, and one element we control is when we choose to file bankruptcy.

To repeat something you’ve heard a lot by now, if we file your bankruptcy case today, we’re using the last six months. But guess what: filing bankruptcy next month will be a different six months than the current hand we’ve been dealt. If we file bankruptcy in seven months from now, that’s potentially an entirely different six months.

How does “When” Factor into the Bankruptcy Means Test?

One element of the Chapter 7 means test is which pay stubs to use for proof of income. The Bankruptcy Code defines “Current monthly income” in section 101(10A)(A) as all the income received in the six months before filing. If we wait to file your case now and file it later, that will be a different six months of income, and some of today’s “old” income will no longer count.

Warning: there’s a very real downside if you choose to wait. You’re not protected from your creditors until you file. That means they can continue to harass you, give you a lawsuit, garnish your wages, foreclose on your house, and make your life miserable while we wait for the ideal time to strike. You really want to meet with a bankruptcy attorney as soon as possible. Contact me now and let’s chat.

What’s the worst that can happen if I file Chapter 7 anyway

If you don’t qualify, omit some of your income, or use the wrong household size, and file Chapter 7 bankruptcy anyway, the Department of Justice will send you a very official letter. It’ll state that in your case the presumption of abuse arises. Bankruptcy abuse is bad. It will then likely file a motion to dismiss the case, and you lose all that time and money. And out all that money, you’ll still need a bankruptcy.

I’m not eligible for Chapter 7, Can I Still File Bankruptcy

Not everyone is eligible for Chapter 7. However, even if you don’t pass the means test for Chapter 7, you still deserve debt relief. Consequently, there’s a bankruptcy option for you. You can file bankruptcy under Chapter 13.

Chapter 13 bankruptcy isn’t terrible: it’s government-operated debt consolidation. You make some payments on your debt, freeze interest so you’re not paying minimums forever, and are protected from lawsuits. You’ll definitely want an experienced bankruptcy lawyer, and guess what: I’ve done hundreds of these.

Contact us now and let me run your means test

Reach out to me now. I can complete the bankruptcy means test for Chapter 7. You don’t need to commit to a full bankruptcy. Let’s just see if with all my experience I can get you under the income limits to pass the means test and if you qualify. If you continue with us, we’ll subtract the means test fee from the bankruptcy cost. Call or email — no obligation — and let’s set it up right now.

    open door to easier bankruptcy forgiveness of student loans

    Student Loan Forgiveness in Bankruptcy: Top Keys for DOJ Guidance

    Posted by Hale Andrew Antico on

    Explaining DOJ Guidance on Student Loan Forgiveness in Bankruptcy

    Bankruptcy attorney explains new DOJ guidance from the Biden Justice Department to make it easier to get student loan forgiveness in bankruptcy

    Yesterday, the Justice Department announced a new plan for student loan forgiveness in bankruptcy. The change could make it easier for people to eliminate — or “discharge”– student loan debt and to finally achieve student loan forgiveness and a fresh start in bankruptcy. Here is what it all means.

    Current law of student loans in bankruptcy

    The way things are right now, student loans in bankruptcy are almost impossible to eliminate. This is because Congress has added a requirement to show not just hardship (as many people in bankruptcy experience), but an undue hardship. Courts have interpreted this very strictly, and, as a result, it’s extremely difficult to discharge student loans in bankruptcy.

    Does the Biden student loan initiative change bankruptcy law?

    Student loan debt in bankruptcy
    Student loan forgiveness may now be easier to achieve in bankruptcy

    No, the Biden student loan forgiveness plan does not change the law. That would take an act of Congress, literally. Unlike other Biden administration plans on student loan forgiveness, which have faced legal challenges, this current plan doesn’t change existing law or otherwise change existing contract law. It’s merely guidance from the head of the executive branch to the Department of Justice, in the executive branch, on how it can try to steer student loan discharge bankruptcy cases.

    So the Department of Justice decides student loan forgiveness?

    Bankruptcy judges make the ultimate decisions about student loan dischargability. The Biden administration plan for student loans in bankruptcy doesn’t change that. It just intends to make it easier for student loan forgiveness in bankruptcy by issuing recommendations to the bankruptcy court.

    Then what does the Dept of Justice have to do with bankruptcy?

    The Department of Justice is very involved in the bankruptcy process. One might think that the IRS is the government agency that rules bankruptcy, because they’re both connected to money. However, the DOJ administers the bankruptcy process through various trustees.

    Under the arm of the DOJ, the United States Trustee is the program which ensures the integrity of the bankruptcy program by prosecuting fraud, perjury, hidden assets, and other bankruptcy crimes. This is why the 341(a) Meeting of Creditors is so critical in every case, and why you should read my 12 crucial tips of do’s and don’ts before filing bankruptcy. But back to the DOJ.

    In other words, the Department of Justice doesn’t decide student loans in bankruptcy. However, under the Biden process for bankruptcy and student loans, the DOJ and Department of Education (also in the executive branch) would review bankruptcy cases with student loan discharge issues. They would then give the bankruptcy judge the agencies’ thumbs-up or thumbs-down.

    Biden student loan forgiveness bankruptcy
    The new student loan forgiveness in bankruptcy opens the door to an easier path to discharge

    To get there, the DOJ and Dept of Ed would review a few key factors to determine whether they will recommend discharge to the bankruptcy judge, who ultimately makes the final decision. Bankruptcy judges are independent thinkers who deliberate, consider applicable law, and provide much thought to the cases and the unique facts before them. It’s not clear how much weight bankruptcy judges will give to this government recommendation, as each judge and each case is different.

    The factors the Dept of Justice and Dept of Education reviews for student loan discharge

    Consistent with current case law of Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2nd Cir 1987), the agencies will review factors to determine if they will recommend discharge to the bankruptcy judge. It’s not all or nothing, as a partial discharge of student loan debt is possible. In re Saxman, 325 F.3d 1168 (9th Cir. 2003). These factors, in no particular order or weighting known at this point, are:

    Present ability to pay

    First, to evaluate this factor, DOJ attorneys will compare debtor’s expenses to two different things.

    1. To start off, the IRS has standards about what is considered reasonable expenses, and the Justice Department will compare those against the debtor’s bankruptcy petition and schedules.
    2. Next, assuming expenses are “reasonable,” Justice Department lawyers will compare debtor’s budget expenses to debtor’s income. If expenses exceed income, this step is satisfied.
    Future ability to pay

    Second, the Justice Department attorneys will then review various factors such as the debtor’s age, unemployment history, education status, and others. Assessing these variables, and based upon the debtor’s unique circumstances, the DOJ will try to predict whether it is likely that debtor’s financial position will stay the same, making it hard to repay student loans in the future. If they exist, certain variables are considered presumptions for future inability to pay.

    These include if the debtor: is 65 years of age or older; has a disability or chronic illness which impacts earning potential; has been unemployed 5 of last 10 years; has failed to get a degree in the field the student loan debt was for; has had the student loan in “payment” status for at least ten years. These factors create a presumption, and as always, can be rebutted.

    Good faith efforts

    Third, the Department of Justice will look at whether the debtor has made a good faith effort to repay the debts. Did the person contact their student loan servicer or provider for repayment options? Did they try to repay the debt? Have they responsibly managed their expenses? Was there enrollment in an income-based repayment plan? If not, is there a good reason?

    At least one of the following steps can be evidence to demonstrate good faith: making a payment; applying for a deferment or forbearance; applying for an IDRP loan or federal consolidation loan; responding to outreach from a student loan servicer or collector for the student loan debt; engaging with the Department of Education or one of their loan servicers about payment options, forbearance or deferment options, or loan consolidation; engaging with a third-party debtor believed would help them manage their student loan debt.

    The good faith standard also looks at whether the debtor’s efforts to obtain employment, maximize income, and minimize expenses.

    Assets of Debtor

    Lastly, the Justice Department will analyze debtor’s assets. Just because a debtor happens to own a home or other real estate shouldn’t be slam-dunk evidence that there’s a lack of undue hardship. However, the DOJ can look at and suggest debtor liquidated assets which are not necessary for the support of debtor and their dependents’ support and welfare. Exempt property does not escape analysis, but Dept of Justice lawyers are cautioned about using it in an undue hardship analysis.

    Can I reopen an old bankruptcy case and try to discharge my student loans under the new Justice Department guidelines?

    The new procedures and standards are only for future cases. If you filed a bankruptcy with student loans in the past, you cannot apply these new guidelines to the old bankruptcy. Footnote 22 of the DOJ guidelines:

    This memorandum applies only to future bankruptcy proceedings, as well as (wherever practical) matters pending as of the date of this Guidance. This Guidance is an internal Department of Justice policy directed at Department components and employees. Accordingly, it is not intended to and does not create any rights, substantive or procedural, enforceable at law by any party in any matter.

    However, while you cannot open a old bankruptcy to apply this Justice Dept guidance, you may be able to try to discharge them in a new bankruptcy. As there are time requirements you have to wait between filing bankruptcy of various chapters, consult with a bankruptcy attorney to discuss your specifics.

    Procedurally, does the new DOJ guidance on student loan bankruptcy automatically happen for all filings, or is action needed?

    A few things have to happen to kick off the Biden student loan bankruptcy process. First, of course, the person, or debtor, has to file bankruptcy. Note that this Biden student loan program doesn’t change the median income eligibility requirements for Chapter 7 and the means test. Someone still has to qualify for Chapter 7 bankruptcy. The alternative would be a solution with the student loans in Chapter 13, which can still be beneficial.

    Next, in the Chapter 7 bankruptcy, the student loan discharge process is not automatic. The debtor has to file additional paperwork, which is like suing the student loan lender in something called an adversary proceeding. It’s additional time and work, and if there is a bankruptcy lawyer involved (and there really should be), this will likely mean contracting for these extra services and an additional fee.

    Finally, after the adversary proceeding has been filed and served on the student loan company, there is an attestation form the debtor completes and submits to the government. The Department of Justice and Education Department will then coordinate their resources to help determine their recommendation to the bankruptcy judge.

    Results not guaranteed, but there’s hope

    We really don’t know how successful this new Biden student loan bankruptcy guidance will be. You have to qualify for bankruptcy, then the government has to make a recommendation, and then a judge decides.

    It’s ultimately unclear how cooperative the Department of Justice and Education Department will be with student loan borrowers under this new bankruptcy process. However, there is tremendous potential for the government applying the process with an eye on compassion and working with the borrowers who most need debt relief, a fresh start, and student loan forgiveness.

    If you have student loan debt and think you fit the above factors and are in Los Angeles County, Orange County, or Ventura County, please contact me for a case evaluation. Thank you for reading.

    time of bankruptcy filing determines homestead exemption

    9th Cir: To Avoid a Judgment Lien, Use Exemptions at this Time

    Posted by Hale Andrew Antico on

    9th Circuit: Lien Avoidance Homestead Determined at Time of Bankruptcy Filing

    If someone wants to avoid a judgment lien in bankruptcy, is the homestead exemption the one at the time the lien attached, or at the time of the bankruptcy filing? The Ninth Circuit Court of Appeals has recently weighed in, and the answer can affect thousands of dollars of liens on your home.

    Why it matters

    Liens in bankruptcy don’t usually go away. But there are times we bankruptcy lawyers can reduce or avoid liens. You may have heard that the California homestead exemption got a massive increase in 2021. This protects more home equity than ever before for people filing bankruptcy.

    Now couple that with the fact that some liens in bankruptcy can be avoided if they impair an exemption. So, the bigger the exemption, the better the chances you can avoid a judgment lien and make thousands — or tens of thousands — of dollars of judgment liens disappear forever.

    It’s very common for bankruptcy attorneys to be asked to remove an old judgment lien from a property. This can be done by reopening an old bankruptcy case where the lien then existed but wasn’t known, or filing a new case if the lien now impairs an exemption. But for a new case on an old lien, given that the homestead law just changed; there can be confusion which timing — and exemption amount — is used.

    The question then is: to determine if the judgment lien impairs an exemption (a simple math problem), do we use the puny California homestead exemption at the time of the lien attaching where the lien won’t impair an exemption? Or the massively humongous homestead at the time of filing? It will determine the very question as to whether the lien can be removed in bankruptcy.

    The Ninth Circuit, citing the Supreme Court, clarified which timing counts

    In the battle of the clock, bankruptcy lawyers fight over which timing to use. The Ninth Circuit Court of Appeals just clarified the answer. It ruled that, “we must look to the amount of the homestead exemption that Boskoski could have claimed if, as Section 522(f) commands, the Greek Village lien against his property is disregarded.” Barclay v. Boskoski, WL 16911862 (9th Cir, Nov. 14, 2022).

    In doing so, the Ninth Circuit relied on the U.S Supreme Court case of Owen v Owen, 500 US 305 (Supreme Court, 1991). The Owen case involved a 522(f) lien avoidance issue also. In that case, a judgment was entered against debtor. Creditor then recorded a lien against debtor’s property, and then state law changed to better protect debtor with a homestead exemption.

    The Supreme Court ruled, “To determine the application of § 522(f) they ask not whether the lien impairs an exemption to which the debtor is in fact entitled, but whether it impairs an exemption to which he would have been entitled but for the lien itself.” Id. at 310-311. Or put differently, the language of 522f looks to the exemption the debtor would have been entitled but for the judgment lien.

    And if there was no “old” judgment lien, the debtor “would be entitled” to today’s (larger) California homestead exemption. And that exemption is large enough where the lien would impair the exemption, and therefore can be avoided by 522(f).

    A note about Wolfe v Jacobson

    The creditor here, Barclay, argued that the Ninth Circuit was bound by Wolfe v Jacobson, 676 F.3d 1193, 1198 (9th Cir, 2012). It wanted “the entire state law” followed, per Jacobson at 1199. This Jacobson reading would have had the Barclay appellate court “apply all limitations that a state places on its exemptions when conducting the Bankruptcy Code’s lien avoidance calculation—including California’s limitations on the application of its homestead exemption.”

    But the Ninth Circuit avoided that, and then pointed back to Owen, quoting the Supreme Court: “the Bankruptcy Code’s policy of permitting state-defined exemptions is not ‘absolute.'” Id. at 313. It found that the Owen case, involving lien avoidance, was a closer match than Jacobson, which doesn’t.

    The 9th Circuit continued: “Anticipating the issue we address today, the Court held that ‘it is not inconsistent’ for the Code to allow states to define their own exemptions but ‘to have a policy disfavoring the impingement of certain types of liens upon exemptions, whether federal- or state-created.'”

    In doing so, the Ninth Circuit in Barclay distanced itself further from Jacobson. Note that just a few months ago, new California SB1099 law was passed, which contained provisions which some speculate will limit Jacobson in other areas. By going out of its way to distinguish Barclay from it, it seems the Ninth Circuit is eroding the Jacobson holding without overturning it (yet).

    The Ninth Circuit Already Ruled on Timing of Exemptions

    The In re Barclay ruling is consistent with another case the Ninth Circuit affirmed on a very similar topic.

    “It is well-established that the nature and extent of exemptions is determined as of the date that the bankruptcy petition is filed.” In re Chiu, 266 B.R. 743, 751 (9th Cir BAP, 1999), later affirmed, 304 F.3d. 905 (9th Circuit Court of Appeals, 2002), citing White v Stump, 266 U.S. 310, 313 (Supreme Court, 1924).

    The Ninth Circuit in Barclay vs Boskoski, without going into much detail, gave a hat tip in passing to Stump above and its “snapshot rule.”

    So, everything points in the same direction and lands at the same place. Exemptions are decided at the time of filing, and not the time of the (much) earlier lien attaching. This is consistent with the holdings of the 9th Circuit in Chiu, the Supreme Court in White v Stump, and the Supreme Court in Owen, which got there using different rationale and analysis.

    All in all, good news for debtors!

    Figuring the Los Angeles Country median home price size is like trying to calculate the median coin weight when all we have is data about stack size

    How to Figure the Los Angeles County Median Home Price (2023)

    Posted by Hale Andrew Antico on

    How to Figure the Los Angeles County Median Home Price (2023)

    The Los Angeles County median home price in 2022 and 2023 can be tricky to determine. There are different sources that say different things. It’s not clear which of the many options will be relied upon by courts and trustees for the California homestead exemption. Also, while bankruptcy may seem to be “just forms,” make sure you check out my list of 12 crucial tips to do or avoid before filing bankruptcy.

    2022-2023 update: there seems to be a consensus among local bankruptcy attorneys as to what the Los Angeles County median home price is. More than that, this L.A. median price changes each year. While it’s still untested in court, a lot of the initial uncertainty has cleared up. Read on!

    Warning: This is provided as information only, and is not legal advice. If you are thinking of filing bankruptcy, do not rely upon any information on this webpage. You are assuming all risk and are literally gambling with your home. You will have only yourself to blame if you use the wrong numbers for the Los Angeles County median home value.

    See a bankruptcy attorney for more updated information before you file, because there are ways you can lose the exemption.

    Average is not Median

    los angeles county median home value
    The Los Angeles County median home value is not the mean

    Before we can determine what the Los Angeles County median home price is, we’ll need to know what it’s not. A median is not the same as the average. This takes us back to high school math, but a quick couple of definitions:

    • Average (or mean): this is where you add up the data, and then divide by the number of data points
    • Median: this is where you list all the data, and then take the number which is at the midpoint

    So, as you can see, the median is not the same as the L.A. County average home value.

    The Median Changes Over Time

    Because the median is the midpoint of all the data, each time there’s another home sale, the median changes and moves. You may figure with a random distribution of data, there would be an equal likelihood that future sales will be about half above and half below the median, keeping the median the same. But home prices change over time and are not static, and particularly during a virus pandemic like the COVID-19 coronavirus we had in 2020 and 2021.

    For example, you might find some data sources that list the median home prices for last year, but only through December. Can you assume that houses would sell for the same prices in December around the holidays as they do during the summer when people move a lot and kids are usually out of school?

    Read Our Means Test Guide on Median Income Limits.

    Median Income Guide

    The Los Angeles County median home price is not the same as that for the L.A. area

    Los Angeles County is one of the largest counties in the United States, with over 4,000 square miles. While you may find data for the metropolitan area, that’s very different than the numbers for Los Angeles County. Why? Because L.A County goes from South Bay all the way up to the Antelope Valley and Lancaster. The Los Angeles County median home price is pulling together data from all these.

    Los Angeles County is home to about 10,000,000 people, while the city of L.A. has “only” 4,000,000. If you use only city data, you’re missing out on home values in remote areas in LA County like Littlerock and Pearblossom on the 138 and on the way to Vegas.

    The Median Home Value is not the same as Median Home Sales Price

    You can find some sites which average the values of the homes in the L.A. area, or even Los Angeles County. The problem with that is this: you’re using their own estimate about the Los Angeles county median home values, even those that didn’t sell, when what you’re really needing is the sales price of homes that actually sold.

    After reviewing all the above, you can see that we’re looking for a very specific thing here, and no one website reports the Los Angeles County median home price, or has information that in 2022 is depended upon reliably as the “go to” source for Los Angeles County median home value information. Over time, maybe one place will emerge, but for now there’s just a few “almost there” entries.

    Some Data Sources Which are Close

    which data source can provide the los angeles county median home price
    Which of the various data sources is the right one?

    With all that being said, you can understand the challenge of finding the Los Angeles County median home price. Most websites are using averages, some have only the L.A. area, and none of them let you have access to the data of all the home sales so you can calculate the median yourself.

    Zillow: this company is famous for using its proprietary “Zestimate” to approximate home values. For example, if you go here, you can find what Zillow calls “the typical home value of homes in Los Angeles.”

    But that number isn’t clear…. What does “typical” mean – average or median? Remember, they’re different. Home value or home price? There’s no indication this is relying on sales data. And for what time period? Now, at this snapshot in time, last month, this year, or last year?

    The website doesn’t say what the Los Angeles County median home price is. It also doesn’t say if it includes single-family homes, is only single-family homes, or something else.

    Realtor: This website features real estate, but if you dig down deep enough, you can find market data, research, and trends. It provides data by month, not year, and appears to be providing listing prices, not sales prices.

    Redfin: Redfin is another national real estate website, which tracks listings and sales, and helps connect home buyers to realtors. It has market dataand trends, but seems to be restricted to only Los Angeles city, not all of Los Angeles county median home price info.

    CAR: The California Association of Realtors also has some market data. But it cautions that the data which it is using comes from over 90 associations and counts “single family detached homes only” and “median price changes may exhibit unusual fluctuation.”

    Trulia: Similarly, Trulia is a real estate website that tracks home sales and house prices. It has a way to filter for L.A. and show market information at the bottom of the page, but doesn’t show Los Angeles county median home price or value info. It appears to list home values the way Zillow does, but it doesn’t appear to be relying on sales data.

    News reports: You may find news reports from Los Angeles-based newspapers that report data on home sales prices.

    how to calculate the inflation-adjusted county median home price
    When calculating the inflation-adjusted county median home price, the median coin isn’t the median stack.

    Note: you may find some websites that provide spreadsheets of Los Angeles County median home price data, and lists medians by month. Taking the median of the medians isn’t the same as the median of all the sales data. It’s just creating garbage data. To find the true Los Angeles County median, you’d have to have access to all the sales data. This is something very few people have.

    And that’s the problem: no one person has the data, and different places which are close report different numbers for the Los Angeles county median home value.

    While some of these are close, none of these seem to provide “the” number. Not one can be relied upon, especially for something which involves risking your home.

    Summing up the initial Los Angeles County median home price

    Is there one bottom line source? Not yet, not until it’s litigated, and honestly, a lot of us in 2021 are trying to sift through all this information to make sense of it. Maybe in the months ahead, one choice will crystalize as the one we all rely upon.

    This will likely be after litigation and people guess wrong. Sadly, they will lose their homes in some cases because they guessed wrong on home value. Currently, there is not one number that we can reliably “bet the house” is the median home price in Los Angeles County.

    2022-2023 update: with all that said, it is generally agreed upon that the 2021 and initial Los Angeles County median home price is $600,000, adjusted for inflation.

    But wait, there’s more!

    California homestead exemption, county median price adjusted for inflation

    Recall that the California homestead exemption is the county median price adjusted for inflation. So, each year, each county’s exemption amount is different. Section (b) of the new California homestead says:

    The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.

    We don’t know exactly where the county median number comes from, (though the Central District of Calif court seems to endorse CAR but that may or may not be valid evidence in a trustee challenge). Further, the inflation percentage is a different number whose source is similarly mysterious.

    Here is how the inflation adjustment of section (b) would work.

    The California fiscal year ends in June. Therefore, we take the difference between the old June CPI number and compare it to the most recent new June CPI number. What is that percentage?

    CPI and inflation-adjusted California homestead exemption
    CPI and inflation-adjusted figures to use in calculating the California homestead exemption, chart from ca.gov showing increases from June 2020 to June 2022

    For 2022, the difference between the June 2022 number (297.447) and the June 2021 number (284.835) represents a 4.43% increase. Therefore, for counties capped by statute at the $600,000 maximum, the maximum 2022 median home price and homestead exemption would be $626,566.96. This number will change again in 2023, and “will adjust annually, beginning on January 1, 2022.”

    I made a calculator so you can figure out this year’s California homestead exemption amount for any county in California (assuming you have the median sale price number), adjusted for inflation. Better yet, we can calculate next year’s inflation-adjusted homestead exemption if we have June’s CPI numbers already. So bookmark this page and return every few months or so.

    Remember, these Calif CPI figures — and the resulting percentage increase — also impact the inflation-adjusted homestead exemption in counties where the minimum was $300,000, or counties in between that and the max, like Riverside and San Bernardino County.

    Be cautious, use this information at your own risk, as you’re literally gambling with your (or your client’s) house. Thanks for reading.

    Contact us

    If you’re in Los Angeles County, contact us to request a case evaluation, or go ahead and schedule it for free right now.

    wrongful death California community property

    Wrongful Death Proceeds and Community Property in California

    Posted by Hale Andrew Antico on

    Wrongful Death Proceeds and Community Property in California

    Someone recently asked, “Are wrongful death recovery proceeds community property in California?” The field of bankruptcy crosses over with so many other areas of law. The question stands at the intersection of bankruptcy law, California community property law, and tort law. But the answer to this wrongful death question is critical for bankruptcy lawyers and someone filing bankruptcy in California.

    Why it matters if wrongful death claims are community property

    This might seem like a tiny point, but it’s really important whether a wrongful death claim or funds are community property or not. There are lots of twists and turns as to whether it affects the other spouse when only one spouse files bankruptcy.

    If the money or right to bring a cause of action belongs to only one spouse and not to both, then the other spouse has no ownership interest in the claim, or the cash. Or put more simply: if the money or right to get the money belongs to one spouse as separate property, it doesn’t belong to the other.

    With that, if the other spouse files bankruptcy and the claim doesn’t belong to them, then the trustee can’t get to it. If it does belong to them as marital community property, the trustee in a Chapter 7 bankruptcy can take it and repay debts with it. Therefore, it’s crucial to know if it belongs to one spouse, or both.

    Yikes. I don’t want the trustee to take my (spouse’s) claim or money.

    Exactly. Chapter 7 bankruptcy is called liquidation bankruptcy. This means someone can take your stuff. Many people think, “I don’t have anything.” But there are assets we may have that are more intangible, but are still valuable.

    One example of an asset that is intangible would be where someone owes you money. Another would be intellectual property. Yet another would be the right to sue someone. And even more removed, the right of a spouse to sue someone, even if the lawsuit hasn’t been filed yet. Yes, that’s an asset, and could be subject to liquidation in a Chapter 7 bankruptcy.

    This is why is why we need to filter a wrongful death claim through the grid of the California community property presumption, and California courts case law that interpret it and how it applies to different kinds of intangible assets over the years.

    A look at the law: the statutes and case law

    Where does the right to bring a wrongful death claim in Calif come from?

    First, a wrongful death — that is, the right to sue for the loss of a loved one — is defined by statute in California law. Civil Procedure Code 377.60 defines the cause of action for wrongful death. It then goes on to say who can bring the cause of action or lawsuit. It includes some obvious relationships like children and surviving spouse. But the statute was recently broadened to include domestic partners.

    The California Community Property Presumption

    The California community property general presumption from the California Family Code 760 is:

    All property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.

    That’s pretty broad. All property. Personal or real. Anywhere. During the marriage. It covers a lot of ground, and doesn’t except a whole lot.

    So, if a married person acquires money from wrongful death of a relative, that money sounds like property. When you consider a claim for wrongful death, that sure sounds like a property right, too. Maybe the courts have held otherwise because the loss of a loved one is so personal to the one spouse and possibly not as personal to the other. Let’s take a look.

    Wrongful Death California Community Property Court Cases

    Starting with Fuentes v Tucker, 31 Cal.2d 1 (Cal Sup Ct, 1947), the California Supreme Court has long held wrongful death recovery proceeds are community property. Later, the California Supreme Court affirmed the rule in Flores v Brown, 39 Cal.2d 622 (Cal Sup Ct, 1952).

    The Ninth Circuit Court of Appeals explained it even more clearly. The Court stated, “There is a statutory presumption that property acquired by the spouses during marriage is community property. The presumption is a strong one, which the California Supreme Court has characterized as fundamental to the community property system.”

    It continued: “It extends to every conceivable type of property, including insurance policies and their proceeds, a cause of action for the wrongful death of or injury to a minor child; a cause of action for injury to either spouse; a law practice; the interest of a spouse in a partnership; good will of a business; borrowed money; and leasehold interests. Why not to a retained equitable interest in a trust?” (emphasis added, cites omitted). Katz v US, 382 F.2d 723, 728 (9th Cir, 1967).

    Given the community property presumption, California Supreme Court case law, and Ninth Circuit Appellate Court rulings, if one spouse files bankruptcy in a community property state, the wrongful death claim of the other spouse would not be separate property. As such, it would have to be disclosed in the bankruptcy, and the money it brings possibly subject to being taken for liquidation by the trustee.

    As always, discuss your potential bankruptcy case with a skilled and experienced bankruptcy attorney before filing. While your brother’s wife’s hair stylist’s gardener didn’t lose anything when they filed bankruptcy, you might lose stuff in your case. Each situation is different, and with full disclosure and planning, we can find a solution that fits you.

    Chicago v Fulton automatic stay and turnover cases are not just about cars

    After Chicago v Fulton: Not Only Cars

    Posted by Hale Andrew Antico on

    After Chicago v Fulton: Not Only Cars

    A Survey of Fulton Rulings and a Weakened Automatic Stay

    Intro: What is a Fulton ruling?

    When Chicago v Fulton (In re Fulton), 141 S Ct. 585 (Sup Ct, 2021) was first decided by the Supreme Court, there was a consensus among bankruptcy attorneys that the erosion of the automatic stay with regard to turnover was only about cars. That is, Fulton was a narrow ruling that was only about impounded vehicles seized prepetition, and wouldn’t really impact or weaken the automatic stay otherwise. Two years on, that turns out not to be the case.

    What “Exercise Control” Meant Before Chicago v. Fulton

    Prior to Fulton, many courts around the United States held that the filing of a bankruptcy petition compelled a party to return to debtor property taken for the purposes of collections prepetition. This forced return was under the power of the automatic stay of 11 USC 362, specifically section (a)(3). That portion of the statute “stays” or prohibits “any act … to exercise control over property of the estate.” Prior to 2021, it was common for courts to hold that property taken prepetition but held postpetition was “exercising control” of it and in violation of the stay.

    Locally here in the Ninth Circuit, an example of a pre-Fulton exercise control case was In re Del Mission Ltd., 98 F.3d 1147 (9th Cir, 1996). There, the appellate court held, “we conclude that the State’s knowing retention of the disputed taxes violated the automatic stay.” Id. at 1152. After Fulton, Del Mission is no longer good law.

    A Chicago v Fulton battle over automatic stay and turnover
    A Chicago v Fulton battle over automatic stay and turnover

    What SCOTUS Ruled in Chicago v. Fulton

    Fulton reversed the law of many courts, including here in the Ninth Circuit. The Supreme Court held that “mere retention of estate property after the filing of a bankruptcy petition does not violate § 362(a)(3) of the Bankruptcy Code.” Id. at 592. It ruled that it to be a stay violation, it would take “affirmative acts that would disturb the status quo of estate property as of the time when the bankruptcy petition was filed.” Merely holding onto something doesn’t do that.

    Deep Dive on the Automatic Stay

    Read the Guide

    What is a post-Fulton case or Fulton ruling

    The Chicago v Fulton case was about the city of Chicago seizing and impounding vehicles prepetition for motor vehicle infractions and to collect fines, then refusing to turn over the vehicle upon the bankruptcy filing per 362(a)(3). Post-Fulton, courts are now finding that any property, not just a car, seized prepetition can be “merely retained” without finding a violation of the automatic stay. Two years later, this is a quick survey to see how courts are ruling on this issue now.

    First Circuit

    Milk. In re Vaqueria Las Martas, 638 BR 482 (1st Cir BAP, 2022). Not a typical automatic stay and turnover case, this Chapter 12 involves a loan for a couple of million dollars secured by thousands of gallons of milk. Fulton came into the picture because of the reference in it to filing an adversary proceeding for turnover under Section 542. Interestingly, at page 499, the 1st Circuit BAP found that the Supreme Court in Fulton “decided the issue narrowly,” but it was referring to the turnover process, not the Fulton ruling itself.

    Bank accounts – “beyond the status quo” In re Educational Technical College, Case No. 21-02392 (EAG) (Bankr Ct, Puerto Rico, 2022). Here, the bankruptcy court found that the allegations against creditor rise above the level set in Fulton and Stuart (discussed below) when it misled debtor, took contradictory positions, used vexatious litigation tactics, and delayed things unnecessarily.

    Second Circuit

    No cases found yet.

    Third Circuit

    Bank accounts. In re Margavitch, Case No. 5:19-05353-MJC (Bankr Ct, MD Penn, 2021). Margavitch was one of the first turnover rulings on the issue to come out after Chicago v. Fulton was decided. It involved a pre-petition attachment lien, and the creditor took no action to withdraw it once the case was filed. The Court held, citing Fulton, that a stay violation requires an affirmative act that disrupts the status quo of estate property on the date the petition was filed. Further, the Margavitch court ruled, “passive maintenance of its valid pre-petition attachment lien in no way changed the status quo and therefore, did not constitute a violation of §362(a)(2).”

    Bank accounts. In re Kipps, Case No. 5:19-01662-MJC, (Bankr Ct, MD Penn, 2022). The same judge who decided Margavitch decides another bank account case, and reaches the same conclusion.

    Fourth Circuit

    No cases found yet.

    Fifth Circuit

    No cases found yet.

    Sixth Circuit

    No cases found yet.

    Seventh Circuit

    No cases found yet.

    Eighth Circuit

    No cases found yet.

    Ninth Circuit

    Bank accounts. Stuart vs City of Scottsdale (in re Stuart), 632 BR 531 (9th Cir BAP, 2021). Here, Bank of America froze three bank accounts of debtor before he filed bankruptcy. Upon filing, the bank refused to release the frozen funds. The Ninth Circuit BAP held, “Where a creditor has executed a prepetition writ of garnishment against a debtor’s bank account, it is under no affirmative obligation to release the funds and need only maintain the status quo.” Id. at 540. “Because the City immediately asked the state court to stay the case and did nothing to change the status quo that existed when Mr. Stuart filed his bankruptcy petition, it did not violate the automatic stay.” Id. at 544.

    Entering a Court Order. In re Censo, 638 BR 416 (9th Cir BAP, 2022). The Ninth Circuit BAP goes one step further. In Censo, there was a pre-petition lien, and so this seems to be the normal fact pattern. What’s different here is that there was a summary judgment order regarding the lien that was granted postpetition. The 9th Cir BAP found that the order did not change the status quo: “Shellpoint’s lien existed as of the petition date, and the DC Order simply affirmed the validity of the existing lien. It did not affect KAH’s possession or control of the Property. The DC Order thus did not disturb the status quo and did not violate § 362(a)(3).” Id. at 425. The automatic stay provision of 362(a)(1) bars actions against debtor. In Censo, the BAP’s found the “automatic stay inapplicable to lawsuits initiated by the debtor, and a defendant in an action brought by the debtor may defend itself in that action without violating the automatic stay.” Id. at 424.

    Court action taken in defense. In re Lee, Case No. 13-11850-gs (Bankr Ct, Nevada, 2022). Debtors reopened their fourth bankruptcy case, which was previously dismissed, to file lawsuits. In response, the creditor brought a motion, and the bankruptcy court ruled, citing Censo, that the automatic stay doesn’t apply to state court actions commenced by the debtors.

    Withholding a passport. In re Bronson, Case No. 20-30704-thp11 (Bankr Ct Oregon, 2022). In this case, there were allegations that creditor withheld debtor’s passport to collect unpaid child support. The bankruptcy court addressed the issue as to whether a stay violation occurred regarding the passport, but found there was not enough factual evidence to make a ruling.

    Tenth Circuit

    No cases found yet.

    Eleventh Circuit

    Beyond the status quo: Car seized prepetition but then sold postpetition is a stay violation. In re Rakestraw, Case No. 22-40960-PWB, (Bankr Ct, ND Georgia, 2022). “Although a creditor’s retention of a vehicle repossessed prepetition does not violate the provisions of the automatic stay in 11 U.S.C. § 362(a)(3), the automatic stay in § 362(a)(4) prohibits the enforcement of a lien against property of the estate. Accordingly, the alleged postpetition sale of the Vehicle to enforce the lien violated the automatic stay.”

    Summary of turnover cases after Chicago v Fulton

    Post-Fulton rulings and jurisprudence are still on the thin side two years later. However, it is clear that the Chicago v Fulton holding applies far beyond motor vehicles. In fact, most rulings citing Fulton had nothing to do with cars and trucks.

    If you know if a case that belongs on this list, please share it on the following form. Thank you.

      Can one person file bankruptcy separately

      One Spouse Filing Bankruptcy: Everything You Need to Know

      Posted by Hale Andrew Antico on

      One Spouse Filing Bankruptcy

      All you need to know about one spouse filing bankruptcy individually or separately

      Can one spouse file bankruptcy without the other?

      Can one spouse file bankruptcy without the other? In consultations, that’s one question I get asked a lot. When we’re married in California, everything is presumed to be joined and shared. So, can a married person claim a bankruptcy? The answer is, “Yes.” Even though someone is married, they have every right to file bankruptcy without the other spouse. They have their own Social Security number and their own credit history. But just because you can do something doesn’t mean you should.

      I’m a bankruptcy attorney practicing in Los Angeles County in California, which is a community property state. All of the information here is specific to California. If you are in a different state, even if it’s community property, this information may not apply, and you should find a bankruptcy lawyer near you. Consult with your bankruptcy lawyer or if you’re in the greater Los Angeles county area, contact me for a consultation.

      If I file bankruptcy individually without my spouse, do I include their finances?

      Yes, in California, a community property state. A debtor needs to disclose all of their assets, and those of the community. 11 USC 541(a)(2). When we get married and say “I do” here, there is a general presumption that every asset or dollar acquired by either person is community property and belongs to both. Calif Family Code 760.

      So regardless of whose name is on the paycheck, bank account, or monster truck, the general marital community property presumption says that if it was acquired during the marriage, it belongs to you both (even a personal injury or wrongful death claim). And when one spouse files bankruptcy, he or she must list the income, stuff, and financial data of the other spouse. For this reason, this factor is no advantage for only one to file, as all the info comes in either way.

      Do I have to list the debts of my spouse if I file bankruptcy separately?

      Family Code Section 910 says, “…the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.” California FC Section 914(a): “..a married person is personally liable for the following debts incurred by the person’s spouse during marriage: A debt incurred for necessaries of life of the person’s spouse before the date of separation of the spouses.”

      Given that, if you are liable for a debt, it is your debt. The bankruptcy petition tells you to list all your debts. Including those of your husband or wife. The bankruptcy trustee will ask if the papers list all of your debts. You must list all debts you are liable for, and that would include those of your spouse in California. Ask your bankruptcy attorney for more on your specific situation.

      If my spouse files bankruptcy, will it affect me?

      “Will filing Chapter 7 bankruptcy affect my spouse?” This question understandably comes up a lot. Affect is such a broad word. It’s almost certain that the bankruptcy will affect the spouse, though how varies from case to case. It may affect the spouse if it’s a Chapter 13 and the community income — that is both pay checks — are used to fund the debt consolidation. It might affect the spouse emotionally.

      Embed from Getty Images

      It could affect the spouse that their debts should be included in the bankruptcy even though the spouse isn’t filing, and affect the credit of the spouse, and the accounts are closed even though they’re being paid on time.

      If you file bankruptcy and your spouse doesn’t, I won’t need their Social Security number or their signature on anything. While I’m happy to meet them, if they truly don’t want to be involved, they need not attend any consultations or court hearings. However, as their financial information is included because of the community property presumption, it will likely affect the spouse in some way.

      Is there a benefit to me if my spouse files bankruptcy and I don’t?

      There are pros and cons to weigh and assess when trying to decide if only one or both spouses should file. There are benefits. Yes, because one spouse can file bankruptcy for both, that’s a benefit. If your spouse files bankruptcy and you don’t, there is one obvious benefit to you: you don’t have a bankruptcy on your credit report. Their bankruptcy should be eliminating your eligible debts also as nonfiling spouse, and the effect is to discharge the debts of both spouses, husband and wife, even though only one person filed. It can be a two-for-the-price-of-one transaction.

      Will filing bankruptcy hurt the credit of the nonfiling spouse?

      Yes. While the married person not filing (fancy term: non-filing spouse) won’t have a bankruptcy on their credit report, their debts should be in the bankruptcy. And when debts are in a bankruptcy, the accounts are typically closed, and reported negatively to Experian, Trans Union and Equifax credit reports. Not “bankruptcy” bad, but still, it should result in derogatory marks on their credit report since the accounts are no longer paid “as agreed.”

      My spouse is disabled, unavailable, or isn’t capable of testifying. Can I sign or testify for my spouse in my bankruptcy?

      Not without something more. Whoever files bankruptcy has to testify as to the truthfulness of the papers. This is done in two ways: one in signing the papers under penalty of perjury, and a second time at the 341(a) meeting of creditors. If your spouse is physically not available, or mentally or cognitively unable to testify, you cannot testify for them, without some additional permission and evidence.

      Can I use a power of attorney to file bankruptcy for someone else?

      The ability to use a power of attorney for a bankruptcy can vary by jurisdiction and is subject to local rules and practice. For example, some courts allow Power of Attorney. United States v Spurlin, 664 F. 3d 954, 959 (5th Cir. 2011), but see also locally here In re Foster, 2012 WL 6554718 (9th Cir. BAP 2012), which says a POA cannot be used in lieu of signature on a pro se complaint as it is construed as practicing law without a license.

      There’s a possible solution where you get court permission to represent your spouse or someone else. In the Central District of California, this is called a “next friend.” FRBP 1004.1 says a bankruptcy court will recognize a personal representative appointed by another court or the bankruptcy court has authority to appoint a next friend. The standard is that petitioner is unable to litigate his own cause due to mental incapacity and the next friend must have significant relationship with and is truly dedicated to the best interests of the petitioner. Coal. of Clergy, Lawyers, & Professors v Bush, 310 F. 3d 1153 (9th Cir. 2002). There are various types of evidence that may be used to show incapacity. AT&T Mobility v Yeager, 2015 WL 6951291, at 5-6 (E.D. Cal. 2015). This will incur extra work and legal fees, and may not always be necessary.

      If one spouse files bankruptcy, does the other spouse get bankruptcy protection?

      As usual in law… it depends. Chapter 13 bankruptcy is special in that it has something called a co-debtor stay of Section 1301. Both spouses are liable on the debts of the marriage, regardless who who incurred it or manages the finances. Family Code 910. So, both spouses are typically liable for all debts. This means that if you file bankruptcy and your spouse doesn’t, that they’re still protected by the codebtor stay if only one of you files Chapter 13.

      Great, but is there bankruptcy protection if only one spouse files Chapter 7?

      Yes, but not for the nonfiling spouse. Chapter 7 bankruptcy only protects the person or people who filed. And spouses in California, while they are liable on debts incurred during the marriage, are not protected by the automatic stay if they don’t sign the petition and schedules and file bankruptcy. However, once the filing spouse gets a discharge, their property cannot be collected against or it’s a discharge violation.

      So, most creditors don’t collect against the nonfiling spouse, since their assets are the same assets as the person who filed and got the discharge. But beware: Family Code 914 says that the separate property of the nonfiling spouse can be collected on, if they have any (most don’t).

      In most Chapter 7 cases, the creditors don’t collect against the other spouse where one files, but are allowed to, even give them a lawsuit. They just can’t use the judgment from a lawsuit to touch community property assets. As that usually is everything, most collectors don’t bother. But they can.

      As you weigh pros and cons, what is the benefit of certainty in Chapter 7 of both parties being absolutely protected from creditor calls and collections worth? If it’s a lot, is it “bankruptcy on your credit report” a lot? Talk with your bankruptcy attorney. There may be other variables in your unique circumstances.

      Can a lien be placed on my house for my spouse’s debts?

      Generally, yes. Because of the Calif Family Code sections above, both spouses (and their assets) are liable for the debts of the other in a marriage. So, if Spouse A got a big credit card debt, there could be a credit card lawsuit resulting in judgment. A judgment lien can then be attached against the asset which Spouse B also owns (typically community property acquired during the marriage in Calif). Filing bankruptcy and getting the automatic stay would stop the lawsuit, and protect that community asset. 11 USC 541(a)(2)(B).

      Can they garnish my paycheck for my spouse’s debts?

      Again, yes. See above. Both spouses — and their community assets — are liable for debts incurred during the marriage under the California Family Code. A paycheck belongs to both spouses, regardless of whose name is on it. There is also the issue if one innocent spouse can be liable for the fraud of the other. So the general answer is, yes, they can garnish your paycheck for the debts of your spouse, and vice verse.

      Summing up

      The intersection of bankruptcy law and community property confuses many people, including attorneys in California. There is not always one best answer to the question, “is it better for us both to file bankruptcy jointly together, or just one spouse separately.” Is it possible to file individually? Yes. What’s best for you and your unique circumstances? Contact me or set up a free Zoom consultation with the link at the top of this page and let’s go over it together. Thanks for reading.

      The 1215-day rule is unsettled about residency vs ownership in California

      1215-day rule: Is Residency Needed, or Merely Ownership in Calif

      Posted by Hale Andrew Antico on

      1215-day rule: Is Residency Needed, or Merely Ownership in California?

      A look at how closing the Mansion Loophole could lose your home in bankruptcy

      Does the 1215-day rule for the homestead require occupancy as a domicile, or merely ownership? This is a new issue here for bankruptcy attorneys in California. It matters to you, too, if you own a home in California and are thinking of filing bankruptcy. This is because the homestead exemption amount until 1/2021 was always below the 522 number. Let’s break this apart in plain English a little bit so we can understand what’s at stake.

      New California Homestead Exemption and the Mansion Loophole

      Homestead Increased in California

      As you may have heard, the California homestead exemption increased recently. For years, it protected a maximum of $100,000 in home equity for a typical married couple. Suddenly in 2021, the California homestead was increased to a minimum of $300,000, and probably more than that where you live.

      Great news, right? But there’s a catch. Well a few catches. But let’s focus on just one: the mansion loophole.

      The Mansion Loophole, Federal Exemptions, and 522(p)

      What is the Mansion Loophole?

      What is the mansion loophole, you ask? It’s the kind of concept that allowed OJ Simpson to go buy a big fancy house in Florida and then move to that state and immediately exempt tons of equity in that home so that his creditors couldn’t get their hands on it.

      Congress decided that’s not fair to parachute in and just take advantage of a state’s generous exemptions. Or for scoundrels such as Enron executives like Kenneth Lay to shield millions in equity after harming so many people. To benefit from a state’s laws and protections, Congress said you need to acquire the property for a period beforehand, and not merely a domicile.

      The Federal Exemptions, 1215 days, and 522(p)

      Federal exemptions are bankruptcy protections available in some states, and fallback numbers for other states. They are figures published and updated by the federal government. The federal exemptions increase periodically. The 1215-day number used in here is valid for 2022, but may adjust in the future.

      Which brings us to 11 USC 522(p).

      to exempt property under State or local law, a debtor may not exempt any amount of interest that was acquired by the debtor during the 1215-day period preceding the date of the filing of the petition that exceeds in the aggregate $125,000 in value in—
      (A) real or personal property that the debtor or a dependent of the debtor uses as a residence;
      (B) a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence;
      (C) a burial plot for the debtor or a dependent of the debtor; or
      (D) real or personal property that the debtor or dependent of the debtor claims as a homestead.

      The gist of all that is that you need to have acquired an interest in the property over 1215 days prior to claiming the homestead exemption for it. OJ would now need to wait over three years after acquiring the property before his assets would be safe from creditors. Mansion loophole closed.

      The 1215-day rule is unsettled about residency vs ownership in California bankruptcy law
      Joyful household members establishing their domicile in an effort to comply with 522(p)

      Why this matters

      “Great,” you say, “but what does this have to do with me?”

      This means that if you file bankruptcy and you have a house, you don’t get the gargantuan California homestead exemption of a minimum of $300,000 if you acquired the interest in the last three years. You lose it, and “only” get the federal homestead exemption of $189,050.

      Maybe that’s enough. Maybe you lose your home in bankruptcy. The 1215 days matter to debtors in California. It can make the difference between keeping your house in Chapter 7 bankruptcy, or losing it.

      They never used to matter. Why? Because before 2021, we could never “lose” the exemption down to $189,050. This is because we were already capped at $100,000. The 522 limitations were never a factor in California. Until now. Suddenly, a $600,000 homestead can be slashed to less than a third. It matters that all of 11 USC 522 is paid attention to very closely now for California bankruptcy lawyers.

      But wait, there’s more.

      1215 days: Ownership or Residency?

      The issue

      Do you have to live in the place for 1215 days, or just own it? Let’s say you have a rental property in Santa Barbara which you acquired and have owned for over four years. It’s had renters living in it while you live elsewhere, and you’ve had title all that time. Then a month before you file bankruptcy, the renters leave and you move in. You live there a month, but have owned it for over 1215 days. Do you get the big massive California homestead exemption, or the shrimpy 522(p) reduction?

      It’s not as clear as you might think.

      Looking back at 11 USC 522(p), the words “amount” and “interest” and “acquire” are not defined in the Bankruptcy Code. So, like most things in life, it’s settled in court.

      The Ninth Circuit ruling on the 1215-day rule

      The Greene Case Looks Like a Win

      The issue was looked at by the Ninth Circuit Court of Appeals in 2009 (in the context of Nevada state law and its exemption). There, the 9th Circuit ruled:

      We hold that “any amount of interest that was acquired,” as used in Section 522(p)(1), means the acquisition of ownership of real property and that the monetary cap in Section 522(p) does not apply to property to which a debtor acquired title more than 1215 days before she or he filed a bankruptcy petition. That language does not include a homestead claim for the underlying property interest, which claim was recorded within the 1215-day period.

      In re Greene, 583 F.3d. 614, 624 (9th Cir, 2009).

      Boiling all that legal jargon down, the Ninth Circuit is saying that the smaller cap of 522(p) doesn’t apply if the acquisition of ownership of the property was more than 1215 days ago. The 9th Circuit Court of Appeals ruled that it can’t limit a homestead property interest that started in the 1215-days period.

      Or more simply, the court in Greene said that as long as ownership is more than 1215 days, the shorter homestead doesn’t matter. But remember, it was ruling on Nevada law and its exemptions.

      But The State Law Must be Interpreted

      Before we celebrate here in California, note that there’s a way this may not be applied here. In other words, state law must be looked at, and each state has its own meaning and reasoning for its homestead exemptions. Is it intended to create a property interest? Or is it just privileges?

      The 9th Circuit reached the Greene ruling after a review of state law (both Nevada and Texas) regarding the purpose of the exemption, and concluded that Nevada exemption law created a property interest, and not merely exemptions and privileges. (Id. at 621-622, citing the review of Texas in In re Rogers, 513 F.3d. 212, 225 (5th Cir, 2008).

      But What About California’s Homestead Exemption: Privilege or Property Right?

      In California, remember, this is all new because the 1215-day cap of 522p never mattered before 2021. The 9th Circuit has not ruled on this recently, that I’m aware of, in the context of California’s homestead exemption.

      However, a long time ago, when Pat Brown was governor, it did rule on the issue, in a case which would distinguish it from Greene and Rogers. The Ninth Circuit Court of Appeals ruled that California’s homestead laws do not create property rights, but merely exemptions.

      “…the California state courts have repeatedly held that the filing of a homestead declaration in that state creates merely a privilege or exemption attached to but not otherwise affecting title.”

      Shaw v United States, 331 F.2d. 493, 497 (9th Cir, 1964).

      That would distinguish it from the good news of the Greene case, and means that you have to live there for the 1215 days to get the California homestead exemption, even if you owned it for over four years.

      In closing

      Best I can tell, Shaw is still good law, at least until someone tests it in the years to come. This means the safe bet is residency is required for 1215 days at the property to “acquire” it, and not merely ownership.

      Perhaps with the new broadening of the homestead exemption in 2021 and the importance it underscores, the 9th Circuit may now reach a different conclusion, but it’s not something I’d knowingly bet a client’s house on.

      California Homestead and Reside Away from Home and State presents challenges

      California Homestead: Intent to Reside and the Out-of-State Home

      Posted by Hale Andrew Antico on

      California Homestead: Intent to Reside and the Out-of-State Home

      A bankruptcy attorney colleague recently asked, does the California homestead exemption protect you if you don’t reside in the house? Are you required to live in the home? For how long? Who qualifies? Does the homestead exemption protect the home if the house isn’t in California? The answer, like most things in law, is: “it depends.”

      Dual residency in two states and and claim homestead in both?

      No, there is no dual residency in multiple states for the purposes of homestead. As you’ll read below, a homestead is the place in which you primarily live. You can’t primarily live in two places. So, the determination is where you primarily reside, which state law applies, and is the house protected by the California homestead exemption.

      Let’s look at these “away from home” situations one at a time.

      The California homestead and intent to reside

      california homestead away from home
      California homestead is challenged if away from home, and the intent to actually live there is unclear

      First, can someone claim the California homestead exemption if they live in the house on the date the petition is filed, but move out after? What if they move out after the Chapter 7 bankruptcy is filed, but it’s just a temporary relocation? Or what if the debtor who filed bankruptcy really has no intention to return?

      The result is very fact-specific, and has had bankruptcy courts and appellate courts carefully examining the particulars for the debtor before filed, on the date the case was filed, and then after the case was filed. Let’s review a few significant cases in the Ninth Circuit to see how the courts have ruled.

      Not residing in the house on date of filing

      First, let’s look at the case of Andy Diaz. He owned and lived at a home in Orange County, Calif. He then suffered two brain aneurysms. Those required many surgeries, and left Mr. Diaz in a coma. After weeks, he awoke from the coma, but couldn’t walk or speak, and the symptoms were similar to a stroke.

      Mr. Diaz got better, and to rehabilitate, moved into his mother’s house, which was across the street from his own home, six houses down. Diaz then filed bankruptcy, claiming the homestead exemption in his home where he wasn’t living.

      The Chapter 7 trustee challenged, and won in bankruptcy court. Diaz appealed. Nobody disputed that the debtor didn’t live in the house when the bankruptcy was filed.

      The 9th Circuit Bankruptcy Appellate Panel (BAP) ruled that, “California courts have long held that a lack of physical occupancy does not preclude a party from establishing actual residency and claiming the homestead, if the claimant intends to return.” In re Diaz, 547 BR 329, 335 (9th Cir BAP, 2016). It went on: “Physical occupancy on the petition date is therefore neither a necessary nor sufficient condition of residency.” Id. at 336.

      Residing in the home at filing, but intent to move

      Next, let’s look at the case of Kevin Gilman. He did live in his house on the date of filing. Residency established, slam dunk on the homestead exemption, right? Not so fast.

      Not an actual photo of Gilman on the date of his bankruptcy petition was filed and the home in escrow

      It turns out that Mr. Gilman also had his home in escrow at the time of filing. Creditor challenged. The bankruptcy court agreed with the debtor. The creditor appealed.

      The appellate court found that, unlike Diaz, it was undisputed that Mr. Gilman had occupancy of the premises, and was a continuous resident of the property.

      However, it also ruled: “To determine whether a debtor resides in a property for homestead purposes, courts consider the debtor’s physical occupancy of the property and the intent to reside there.” In re Gilman, 887 F.3d 956, 965 (9th Cir, 2018).

      It then cited the case of Mr. Diaz when it wrote: “Physical occupancy on the filing date without the requisite intent to live there, is not sufficient to establish residency.” Gilman at 966, citing Diaz at 336.

      After all that, the bottom line after Gilman to successfully claim a California homestead exemption is that, among other things, regardless of where the debtor lives on the date the bankruptcy petition is filed, there has to be evidence to show that the debtor intends to live at the residence.

      california homestead residence intent extraterritorial
      California homestead exemption is dependent if you’re moving away from home, or just going for a temporary walk

      Intent to reside but only equitable interest

      What if the person filing bankruptcy claiming the homestead exemption in California doesn’t even have title to the house? That brings up the case of Steve Nolan. There, Mr. Nolan claimed an exemption for a property in Corona, California. Like Gilman, he lived at the property, and intended to continue living there. Unlike Gilman or Diaz, he didn’t have legal title to the house.

      Instead, he was both trustee and partial beneficiary of a trust, which held title to the property. The bankruptcy court ruled that Mr. Nolan did not have an interest in the property subject to an enforcement lien and not even bare legal title.

      However, because he was 50% beneficiary of the trust, that portion is property of the estate per 11 USC 541(a)(1) and (c)(2). The Court then reviewed applicable case law that allows homesteading based on an equitable interest, and ruled in debtor’s favor. In re Nolan, 618 BR 860 (Bankr Ct CDCA 2020).

      The California homestead exemption for the out-of-state house

      Occupancy, future intent, but home outside California

      Next, we ask if someone claim a California homestead exemption if the California debtor lives in the house, intends to reside there so it’s his residence and domicile, but the house isn’t in California? The Ninth Circuit Court of Appeals considered this and ruled: yes.

      This is the case of Robert Arrol. He bought a house in Michigan. Then, without selling that home, he moved to California for two years. He then moved back to his Michigan house, and within 90 days of moving, he filed bankruptcy in California.

      He used California’s homestead exemption to protect his Michigan residence. You guessed it: the bankruptcy trustee objected to the homestead exemption. The bankruptcy court ruled in favor of Mr. Arrol, and the trustee appealed, and lost again. The trustee appealed yet again, this time to the Ninth Circuit.

      The Ninth Circuit’s ruling on an out-of-state California homestead

      The appellate court examined 11 USC 522(b)(2)(A), which pointed to state exemption law. Given that Mr. Arrol lived in California for the greater part of 180 days before filing, California law applied. Looking at CCP 704.730 and 704.710(c), the appellate court determined whether the state law allowed this. The Ninth Circuit found that California state law didn’t limit the homestead exemption to dwellings in California, and concluded,

      We find nothing in the California exemption statutory scheme, its legislative history, or its interpretation in California case law to limit the application of the homestead exemption to dwellings within California.

      In re Arrol, 170 F3d 934, 937 (9th Cir, 1999).

      California homestead exemption for out-of-state property with no intent

      Mike Showalter owned an interest in a Florida house. He had lived at the Florida property for some time over decades. For the twelve years prior to filing bankruptcy, he lived in California in a rental property. After filing bankruptcy, he moved to a different rental property in California. A month before filing bankruptcy, while living in California, he signed a declaration that the Florida house is his principal dwelling, and it’s his homestead.

      The appellate court determined that the declaration was “patently untrue” and by Mr Showalter’s own testimony, he hadn’t lived at the Florida property for about twenty years, he didn’t live in Florida, and no credible intention to return to live at the Florida property, and the claim of California homestead is invalid. In re Showalter, (12-22720, 9th Cir BAP, 2013).

      Residency and the California Homestead: Piecing it all together

      As of this writing, it seems the current law on the California homestead exemption for a home where you maybe don’t live which may be in a different state is the following. You can claim the California homestead exemption if it’s your residence, California law applies, and you intend to live in that residence as your future home, even if it’s not in California.

      sell home chapter 13

      Sell a Home in Chapter 13 Bankruptcy: Motion to Sell or Refi

      Posted by Hale Andrew Antico on

      Sell a Home in Chapter 13 Bankruptcy: Motion to Sell or Refi

      My clients ask me, “can I sell a home in a Chapter 13 bankruptcy?” As a bankruptcy attorney experienced in Chapter 13, selling a house is an issue that comes up often, particularly in a robust housing market. This is written without giving advice to the specifics of your case, but merely addressing whether it’s possible to sell or refinance a house during Chapter 13.

      The answer is “yes… but.” It’s not always in your best interests to sell a home in Chapter 13, and you really should consult on this with your bankruptcy lawyer, as facts vary depending on judicial circuit, state, local practice, and your particular case and its Order Confirming. As I’m a Los Angeles bankruptcy attorney, I’ll be focusing on practice in the Central District of California here in the Ninth Circuit, so the following may not apply to you if you’re elsewhere.

      Can I move during a Chapter 13 bankruptcy?

      Let’s start with the basic question of whether you’re allowed to move and change residence during the term of a Chapter 13. The answer is, “Yes.” There is nothing in a bankruptcy that prevents you from moving, or even changing states. You are free to move about the country.

      As leaving the state would likely mean you’re now working out-of-state from where the case was filed, you will almost certainly want to update your Schedules with your new employer, income and expenses, and this may potentially affect your plan payment, and the percentage of debt which you’re paying the general unsecured creditors. And that may turn into a Motion to Modify (MoMod) being filed with the court, leading to new legal fees.

      Motion to Sell or Refinance in Chapter 13

      A Motion to Sell or Refinance in Chapter 13 is where you ask the judge permission to sell or refinance your home. So, yes, you can sell or refi in Chapter 13. Whether it’s a smart decision or not will vary based on the circuit, district, and even your particular case, and you’ll want to seek advice with your bankruptcy lawyer.

      Chapter 13 can pay only a fraction of your debts. But that can trigger a couple of things that lead to it getting fed more money. If you’re paying less than 100% of the general unsecured creditors, sometimes you don’t get to keep tax refunds in Chapter 13. Similarly, when there is a ton of extra money from a home sale or refi, that too can lead to more debt getting paid.

      Revesting of the Estate and Form Plans

      Revesting

      One factor as to whether you should sell a home in Chapter 13 (or refinance in your Chapter 13 bankruptcy) depends on whether the estate revests at confirmation or at discharge. That’s all a fancy way of saying, “when does the ownership and control of your stuff — including your home — return to you, the debtor?”

      In bankruptcy, here’s the crux of the matter: when you sell or refinance in a Chapter 13, do you have to use the sale proceeds to pay all of your general unsecured debt, or all of the part you are intending to pay during the bankruptcy? Remember, Chapter 13 bankruptcy doesn’t necessarily pay all your debt. If a Chapter 13 is only paying a fraction of the credit cards, how much of the credit cards get paid by the proceeds of the house or other sale?

      A recent case on postpetition equity

      The issue as to whether you can sell in a Chapter 13 and who gets the proceeds was recently seen in Colorado, when the Chapter 13 trustee fought to get the postpetition appreciation of an LLC. In re Klein, WL 3902822 (Bankr. D. Colo. 2022). The trustee argued that proceeds were postpetition property under Section 1306 (nothing about 541a6). However, debtor argued that Section 1327 says that property vests in the debtor at confirmation, unless provided otherwise in the plan. The two sides fought about the tension between 1306 vs 1327. Ultimately, the Court concluded that 1327 was more specific and the proceeds belonged to Debtor.

      What about Section 1322(b)(9)? That says the plan may “provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity.” That “may” (coupled with 1327b) also indicates that it may not.

      More on that later.

      This is the Tenth Circuit. What about here in the Ninth Circuit?

      Black vs Leavitt (In re Black)

      Glad you asked. That’s the issue the Ninth Circuit Bankruptcy Appellate Panel faced in 2019 in Black vs Leavitt (In re Black), 609 B.R. 518 (9th Circuit BAP, 2019). There, the BAP decided that when someone tried to sell a home in a Chapter 13 (actually, a rental property), the property — and the proceeds — were the debtor’s to do as he wanted.

      In our view, the revesting provision of the confirmed plan means that the debtor owns the property outright and that the debtor is entitled to any postpetition appreciation. When the bankruptcy court confirmed Mr. Black’s plan, the Property revested in Mr. Black. See In re Jones, 420 B.R. at 515. As such, it was no longer property of the estate, so the appreciation did not accrue from estate property.

      Id. at 529.

      Great news, right? Not so fast. There’s some key language in footnote 9 of the same case. There, the 9th Cir BAP wrote:

      If the plan did not vest the Property in Mr. Black, the result would likely be different. See Klein v. Chappell (In re Chappell), 373 B.R. 73, 83 (9th Cir. BAP 2007), aff’d sub nom. Gebhart v. Gaughan (In re Gebhart), 621 F.3d 1206 (9th Cir. 2010) (In a chapter 7 case, where property does not revest in the debtor, “[u]nder well-settled Ninth Circuit law, any postpetition appreciation in value in the residence in excess of the maximum amount permitted by the exemption statute invoked inures to the benefit of the estate.”); § 541(a)(6) (a bankruptcy estate includes “[p]roceeds, product, offspring, rents, or profits of or from property of the estate ….”).

      Clearly, the issue of who gets the sale proceeds is determined by what the Chapter 13 plan says. It’s important to know this crucial fact before asking your bankruptcy attorney to submit a motion to sell or motion to refinance real property.

      In re Berkley

      In one case, the debtor was repaying one percent (1%) of his unsecured debt. The plan said the estate revests at confirmation. After the case was confirmed, he started getting stock options. At month 57 of his plan, he sold his postconfirmation stock options for $3.8 million. Trustee filed a motion to modify for some of the sale proceeds. The Ninth Circuit BAP held that Section 1329 and a modification allows for change of circumstances, and the millions of dollars means that debtor can repay his debts.

      The 9th Circuit BAP acknowledged that the estate terminated at confirmation, citing 9th Circuit precedent of In re Jones, 420 BR 506 (9th Cir BAP 2009), aff’d by 9th Cir in 657 F3d 921 (9th Cir, 2011). In Jones, the Ninth Circuit adopted the “estate-termination approach.” This approach is where the estate ceases to exist at confirmation. In the estate termination approach, all property then becomes property of the debtor, whether acquired before or after confirmation.

      The Berkley BAP then nodded at its own recent ruling in the matter of In re Black (above).

      However, the BAP then held that “[u]nder § 1329, the bankruptcy court can approve a plan modification that increases the debtor’s plan payments due to a postconfirmation increase in the debtor’s income, whether or not the additional income is property of the estate.” In re Berkley, 613 BR 547, 553 (9th Cir BAP, 2020). It distinguished Black and Jones from the instant case, as it is solely concerned with postpetition wages.

      Central District Form Plan

      Whether the estate revests at confirmation or at discharge is a key determining factor about who gets the sale proceeds of postpetition appreciation from a prepetition asset. So what does the form plan say here in Los Angeles County, in the heart of the Central District of California?

      Locally, here in the Central District of California, the estate doesn’t revest in the debtor until discharge. We know this because this is what our Chapter 13 form plan says. Your mileage may vary.

      cdca chapter 13 plan revesting in debtor
      The standard Central District of California Chapter 13 Plan revesting in debtor at discharge

      There is the key language that controls when you sell a home in Chapter 13 bankruptcy in most cases in the Central District of California when there is a Motion to Sell or Refi with proceeds. It means that the debtor and proceeds must not only pay “all of the plan” debt, but “all of the all” debt. This can be a strong disincentive. It often is better to just stay in the Chapter 13 until discharge, and get forgiveness of potentially tens of thousands of dollars of unsecured debt. After discharge, the house, and what you do with the proceeds, are yours.

      Now, I supposed there is nothing preventing debtor from adding a nonstandard provision to the plan that debtor’s property revests at confirmation. But that may lead to other hazards that involve the automatic stay and debtor’s property which are no longer property of the estate. Try this at your own peril.

      Conclusion

      So, yes, Virginia, you call sell a house in Chapter 13 bankruptcy. You have the right to move cities, even states, as long as you maintain your plan payments, and update your schedules to reflect current income and expenses. However, who gets the sale proceeds is very specific to where you live, what your appellate courts say, and what your local district’s forms say. As always, ask your bankruptcy attorney, and thank you for reading.