[WSBARP] Homestead Amendments

[Dwight Bickel]

I am encouraged to read about the homestead amendments. Why? Because In re Wilson was my case and I am still bitter about that perceived injustice.

There were five pre-bankruptcy judgments. No objection in bankruptcy to homestead. The owners refinanced the mortgage that was before the judgments. The title company insured the new lender without exceptions for the pre-bankruptcy judgments based upon the lawyer for the owners who told the title officer the judgment liens were removed based upon bankruptcy and homestead law. [That was not the practice of the title companies at that time.] But now I had to defend the lender against execution. I argued there should be no right to execute after the bankruptcy where the value of the property at the time of the bankruptcy did not exceed the homestead amount. Unfortunately, the appellate court disagreed on reconsideration.

The opinion agreed that the homestead exemption protected the entire value of the property at the time of the bankruptcy, but allowed later execution against the property after the bankruptcy based upon the inflation after the bankruptcy. The essence of that decision was that the lien of the judgments was preserved since each was recorded and the duration of those five judgment liens was not affected by the bankruptcy discharge. I won that case before I lost it.

For those who wonder why the bankruptcy could not be reopened to seek an Order under 522(f) removing the liens, the owners did seek that permission to reopen the bankruptcy but the bankruptcy court denied the request. Another unfortunate part was that the court did not allow the new mortgage to claim the priority of the prior mortgage that it paid based upon equitable subrogation. Of course the title company paid the judgments and protected its lender insured and the property owners kept the house.

I am optimistic that the new homestead amendments should solve that recurring problem.

Dwight A. Bickel
Real Property Title Advisor
Washington Title Professional
Dwight at DwightBickel.com<mailto:Dwight at DwightBickel.com>
https:/dwightbickel.com

To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>

Here is what has passed on LLT and Homesteads (these summaries were not written by me)

·       ESSB 5408 (Sen. Stanford) – Homestead exemption Status: ESSB 5408 passed both the Senate and House with broad bipartisan support. It is on the Governor’s desk.
ESSB 5408 increases the homestead exemption to either $125,000 or the county median sale price of a single-family home in the preceding calendar year—whichever is greater—and allows appreciation of the property to be included in the exemption after a bankruptcy filing, even if it exceeds the statutory limit. In a bankruptcy case, the debtor’s exemption shall be determined on the date the bankruptcy petition is filed. If the value of the debtor’s interest in homestead property on the petition date is less than or equal to the amount that can be exempted under the homestead law, then the debtor’s entire interest in the property, including the debtor’s right to possession and interests of no monetary value, is exempt. Any appreciation in the value of the debtor’s exempt interest in the property during the bankruptcy case is also exempt. This language is to address the case of Wilson v. Rigby (In re Wilson), 909 F.3d 306 (9th Cir. 2018).

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