Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice to anyone. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be or should be read as being legal advice to anyone.
By Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys, Andy@BLSforAttorneys.com
At least one of the Eugene Chapter 7 trustees has asserted that he will begin challenging debtors' uses of one of the two sets of California property exemptions, the one in California Code of Civil Procedure § 703.140(b). His legal basis for this is a published opinion of the Arizona Bankruptcy Court, In re Regevic, 389 B.R. 736, dated June 24, 2008, which invalidated that bankruptcy-only set of exemptions as contrary to the Supremacy Clause. Since this opinion is not binding in Oregon, it is unclear how many trustees will try asserting this position, but at the very least practitioners should be aware of this possibility and perhaps consider using the alternative set of exemptions, in California Code of Civil Procedure § 704.010ff.
This Arizona opinion and the fact that a trustee is asserting it comes to us courtesy of Eugene Attorney, Kim Covington, of Shlesinger & deVilleneuve Attorneys PC, who first posted an alert about this on the Debtor-Creditor Section's Discussion list serve on 9/10/08. She says, "With BAPCPA's change to the 730-day rule for determining the which state's exemptions to apply, this Arizona bankruptcy court opinion about California exemptions is very pertinent in Oregon, given how often our clients relocate to and from California."
The 730-day rule of § 522(b)(3)(A), requires the use of the California exemptions if a debtor was not domiciled in Oregon during all of the 730 days before filing and was domiciled in California during the 180-day period immediately before that 730 days (or more during those 180 days than any other state).
Covington further notes , "According to the bankruptcy judge in Regevig, there is a complicated history of how California came up with its double exemption scheme, which includes the legislature reacting once before to the nullification of a prior statute because of the federal Supremacy Clause. The Arizona judge quotes a prior opinion calling the current scheme a 'comedy of errors.' Practically speaking, there are major differences between these two California exemption regimens, with neither one necessarily more favorable to all debtors. For example, the bankruptcy-only exemptions in § 703.140(b) have a significant wild card exemption which the Section 704 set of exemptions do not, but the latter is much more generous in many of the specific exemption categories."
Covington's bottom line: "With your California exemption clients, consider just using the § 704.010ff exemptions if they adequately cover the assets, thereby avoiding the risk of trustee challenge under Regevig. And if the client needs the big wild card exemption or anything else in § 703.140(b), first check around to see whether your local trustees are raising the issue."
Based on the most recent information in other authoritatively sounding websites, there will not be an appeal of the Arizona bankruptcy judge's decision in Regevig: the debtors Matthew and Angelia Regevic, after first filing a notice of appeal, have now settled with their Chapter 7 trustee. But this Regevic opinion is hardly the last word.
Because this is by no means a one-sided debate. Notwithstanding the peculiarities of California's scheme, double exemption schemes are not rare among the states, where one set of exemptions are available only to those filing bankruptcy. And perhaps the most recent bankruptcy court to address this same issue has ruled just last month in the opposite direction of Regevig, that West Virginia's bankruptcy-only exemptions do NOT violate the federal Supremacy Clause. In re Morrell, Case No. 08-519 (Bankr. N.D.W.V Aug. 14, 2008). This Court's analysis is much more detailed than Regevig's, citing numerous opinions and even a law review article on each sides of the issue. Because of its thoroughness, Morrell is required reading for anyone wanting to dig further into this arena.
Some California trustees are gearing up to challenge the § 703.140(b) exemptions in the wake of Regevig, with debtors' attorneys there poised to fight back, so it seems inevitable that eventually there will be another, this time binding, appellate opinion addressing this. In the meantime, any debtors' attorney who is inclined to push back against any of our Oregon trustees challenging California's § 703.140(b) bankruptcy-only exemptions, either informally or in litigation, there is plenty of grist for that mill.
This Arizona opinion and the fact that a trustee is asserting it comes to us courtesy of Eugene Attorney, Kim Covington, of Shlesinger & deVilleneuve Attorneys PC, who first posted an alert about this on the Debtor-Creditor Section's Discussion list serve on 9/10/08. She says, "With BAPCPA's change to the 730-day rule for determining the which state's exemptions to apply, this Arizona bankruptcy court opinion about California exemptions is very pertinent in Oregon, given how often our clients relocate to and from California."
The 730-day rule of § 522(b)(3)(A), requires the use of the California exemptions if a debtor was not domiciled in Oregon during all of the 730 days before filing and was domiciled in California during the 180-day period immediately before that 730 days (or more during those 180 days than any other state).
Covington further notes , "According to the bankruptcy judge in Regevig, there is a complicated history of how California came up with its double exemption scheme, which includes the legislature reacting once before to the nullification of a prior statute because of the federal Supremacy Clause. The Arizona judge quotes a prior opinion calling the current scheme a 'comedy of errors.' Practically speaking, there are major differences between these two California exemption regimens, with neither one necessarily more favorable to all debtors. For example, the bankruptcy-only exemptions in § 703.140(b) have a significant wild card exemption which the Section 704 set of exemptions do not, but the latter is much more generous in many of the specific exemption categories."
Covington's bottom line: "With your California exemption clients, consider just using the § 704.010ff exemptions if they adequately cover the assets, thereby avoiding the risk of trustee challenge under Regevig. And if the client needs the big wild card exemption or anything else in § 703.140(b), first check around to see whether your local trustees are raising the issue."
Based on the most recent information in other authoritatively sounding websites, there will not be an appeal of the Arizona bankruptcy judge's decision in Regevig: the debtors Matthew and Angelia Regevic, after first filing a notice of appeal, have now settled with their Chapter 7 trustee. But this Regevic opinion is hardly the last word.
Because this is by no means a one-sided debate. Notwithstanding the peculiarities of California's scheme, double exemption schemes are not rare among the states, where one set of exemptions are available only to those filing bankruptcy. And perhaps the most recent bankruptcy court to address this same issue has ruled just last month in the opposite direction of Regevig, that West Virginia's bankruptcy-only exemptions do NOT violate the federal Supremacy Clause. In re Morrell, Case No. 08-519 (Bankr. N.D.W.V Aug. 14, 2008). This Court's analysis is much more detailed than Regevig's, citing numerous opinions and even a law review article on each sides of the issue. Because of its thoroughness, Morrell is required reading for anyone wanting to dig further into this arena.
Some California trustees are gearing up to challenge the § 703.140(b) exemptions in the wake of Regevig, with debtors' attorneys there poised to fight back, so it seems inevitable that eventually there will be another, this time binding, appellate opinion addressing this. In the meantime, any debtors' attorney who is inclined to push back against any of our Oregon trustees challenging California's § 703.140(b) bankruptcy-only exemptions, either informally or in litigation, there is plenty of grist for that mill.
by: Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys
Andy@BLSforAttorneys.com
Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice to anyone. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be or should be read as being legal advice to anyone.
© 2008 Bankruptcy Litigation Support for Attorneys
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