Appreciation in a Home Is Exempt in California, but Not in Washington, Circuit Says

Perceiving a pivotal difference between the California and Washington State exemptions, the majority on a Ninth Circuit panel refused to allow a chapter 7 debtor to exempt the post-petition appreciation in the value of her homestead. District Judge Paul C. Huck of Miami, sitting by designation, wrote a 37-page dissent, decimating the majority’s 11-page opinion, in this writer’s opinion. The majority’s opinion may not affect practice in California. However, practitioners in Washington State should study the majority opinion carefully and modify their tactics accordingly. Among other things, debtors in Washington should not underestimate the value of their homes when filing schedules initially, because assigning a low value at the filing date could bar the debtor from later realizing the maximum homestead exemption. The state legislature in Washington could amend the exemption statute to prevent the state’s residents from being at a disadvantage compared to residents of other states.

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