Recent Case Summary

States may not enact bankruptcy-specific exemption statutes

A California exemption statute provided that a debtor in bankruptcy, but not debtors under any other circumstances, could claim a wildcard exemption approximately double the amount allowed under the Bankruptcy Code federal exemptions. The Trustee objected to the exemption, which would have allowed the Debtor to retain four vehicles. In re Regevig, 2008 WL 2502981 (Bkrtcy.D.Ariz. 2008).

Arizona Bankruptcy Judge Haines found the California exemptions applied under §522(b)(3)(A), because the Debtors had not lived in Arizona for the requisite 730 days prior to their case filing. The Court then noted the confusing history of the California exemption laws, which essentially include two separate sets of exemptions. One set of statutes applies to judgment debtors, while the other is for debtors in bankruptcy proceedings. Additionally, because California has opted out, the federal exemptions are not available to bankruptcy debtors. Citing the Ninth Circuit case of In re Kanter, 505 F.2d 228 (9th Cir. 1974), the Court held that under the Supremacy Clause of the Constitution, states do not have the authority to declare property exempt in a bankruptcy context, where such property would not also be exempt outside of the bankruptcy. Trustee’s objection sustained.