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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33504
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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My California chapter 7 bankruptcy case was reopened do to

Customer Question

My California chapter 7 bankruptcy case was reopened do to my house foreclosure ending in a surplus of funds, the check has been issued to me but not cashed or deposited yet. on my amended schedule C, I checked box 522(b)(2) at the top, what law do I specify 704.730(a)(1) or 704.720(b)(1)?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 1 year ago.
Hello,

1. Do you have a declared/recorded homestead exemption?

2. Did you select the California Code Civ. Proc. bankruptcy exemptions found in 703.140(b) for your original bankruptcy petition; or the exemptions found at 704.010 et seq?

3. Was your foreclosure sale a deed of trust sale or a judicial foreclosure (sheriff's execution sale)?
Customer: replied 1 year ago.


1. No recorded homestead exemption.


 


2. I selected C.C.P. 703.140(b)(1) originally.


 


3. It was a non-judicial foreclosure i believe held on the court steps.


 


also do I need to amend schedule B to add the check I received? If yes where?

Expert:  socrateaser replied 1 year ago.
What was the surplus amount?
Customer: replied 1 year ago.


$28,000.00

Expert:  socrateaser replied 1 year ago.
Okay, here's the deal:

There are three different homestead exemptions in California: CCP § 704.710 et seq. (automatic); CCP § 704.910(a) (declared); CCP § 703.140(b)(1) (bankruptcy only).

All three can be used in bankruptcy, but there are restrictions:

1. The automatic bankruptcy exemption operates only against forced judicial sales -- it doesn't work against deed of trust foreclosure sales, because these are nonjudicial actions. See Title Trust Deed Service Co. v. Pearson (2005) 33 Cal. Rptr. 3d 311.

So, you can't use this one to cover your $28,000.

2. The declared homestead requires that you file a declaration of homestate with the county clerk-recorder where your deed is filed, before you file bankruptcy, and before you are foreclosed, or it does not apply.

So, you can't use this one to cover your $28,000.

3. That leaves the bankruptcy-only exemption of CCP § 703.140(b)(1). This is apparently the exemption that you already selected. What you may want to add is CCP § 703.140(b)(5), which is the "wild card" exemption that would let you keep the cash surplose received from the transaction.

Re amending Schedule B, that schedule already correctly represents the assets held by you at the date of filing the bankruptcy petition, so I don't see that you need to amend.

In fact, you may want to contact the trustee and see if you can just agree on giving him the amount beyond the 703.140(b)(1) homestead maximum in exchange for his agreement to close the case again, and just leave it at that. Seems to me that a hearing and a court order will be a big waste of everyone's time.

Hope this helps.
Customer: replied 1 year ago.


In my initial question I said that I checked box 522(b)(2) at the top, is that right, or should I have checked 522(b)(3)?


 


And can I go ahead and deposit the check in my bank account?

Expert:  socrateaser replied 1 year ago.
No, 522(b)(2) is correct. California's two different systems are each "state" exemptions.

Hope this helps.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33504
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.


So 522(b)(2), is that system 1 or system 2 ?


 


Cause in the Nolo book, How to file for Chapter 7 Bankruptcy, The homestead exemption in system 1 under law is C.C.P. 704.730 is $75,000 Real or personal property occupied at time of filing for bankruptcy if single, and also there is no "wild card" exemption, the "wild card" exemption is in system 2.

Expert:  socrateaser replied 1 year ago.
If your concern is that there is a greater homestead exemption available, then please see my original answer. You cannot use the $75,000 homestead exemption, because you do not have a declared homestead recorded, and the sale of the property occurred as part of a deed of trust foreclosure, rather than as a judicial/sheriff's sale.

The only homestead exemption that you can use is the system 2 homestead and wild card exemptions. And, they are not great enough to cover a $28,000 check. If your original petition was filed before April 1, 2013, then the most you can exempt is $23,250 -- the rest the trustee can take to pay creditors.

Now, you might be able object to the trustee's reopening the case, assuming that the motion hasn't already been granted. But that's a new issue, for a new Q&A session, if you want to discuss it further.

Hope this helps.
Customer: replied 1 year ago.


Thank you for clarifying, I appreciate it... And your original answer of


522(b)(2) is system 2 correct?

Expert:  socrateaser replied 1 year ago.
Schedule C doesn't ask for that distinction. Both system 1 and 2 faull within Bankr. Code 522(b)(2).

Hope this helps.
Customer: replied 1 year ago.


Ok, then what is code 522(b)(3) for ? Cause that's the box that I checked when I originally filed.

Expert:  socrateaser replied 1 year ago.
That's for the federal bankruptcy code exemptions, which are not permitted in California.

If you're asking why no one ever complained -- if the trustee was all over every Chapter 7 pro se pleading, the trustee would go broke, too. Trustee gets very little, financially from a Chapter 7, unless something like what's just happened to you occurs (debtor windfalls are rare).

Hope this helps.
Customer: replied 1 year ago.


In one of your earlier answers, you stated that I may want to add the "wild card" exemption to my homestead exemption. Do I just add that law together on the same line as the homestead exemption like this?


CCP § 703.140(b)(1)


CCP § 703.140(b)(5)


 


I have moved since filing the original schedule C, so when I amend schedule C, do I need to change the address that I listed for the location of the property that I'm exempting?


 


 

Expert:  socrateaser replied 1 year ago.
Do I just add that law together on the same line as the homestead exemption like this?

CCP § 703.140(b)(1)


CCP § 703.140(b)(5)

 

A: Yes.


I have moved since filing the original schedule C, so when I amend schedule C, do I need to change the address that I listed for the location of the property that I'm exempting?

 

A: You can't exempt the new property. Your exemption is for the property in which you resided at the date of filing of the bankruptcy petition -- and the net proceeds of sale (which is why you are adding the other section of law -- to cover the proceeds represented by the check.

 

Hope this helps. .

Customer: replied 1 year ago.

I understand that I can't exempt the new property. What I'm asking on the second question is, under the column "description of property" I listed the location of the property I exempted "household goods, automobiles, Jewelry etc..." at my old address, so since I moved, do I need to list the location of the property to my new address ?


 

Expert:  socrateaser replied 1 year ago.
I would not be making massive alterations to your petition. That petition is fixed in time as of the date it was originally filed, unless there was a mistake made at the time of original filing. So, my answer here would be "no."

Your other questions concerned the homestead, and what may have been a mistaken legal reference -- made at the time you filed the petition. The fact that you have now moved is not a mistake. The address was correct when you originally filed.

Hope this helps.
Customer: replied 1 year ago.

Since I am a Pro se debtor, do I need to notify everyone on my mailing matrix that my case has been reopened?


 


And if so, is there a guideline that I have to follow?


 


 


Thank You

Expert:  socrateaser replied 1 year ago.

You must generally notice the U.S. Trustee, the trustee presiding in the case, and any creditor whose interests may be negatively affected by the amendment.

Hope this helps.

 

Note: This Q&A session is quickly becoming a 13-week class in bankruptcy law. If you wish to consider this conversation, please consider providing a positive rating for another of my answers, so that I may receive appropriate compensation for my efforts.

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