Wilson v. Rigby, No. 17-35716 (9th Cir. 2018)
Annotate this CaseWilson filed her voluntary Chapter 7 bankruptcy petition in December 2013, electing to take the federal exemptions and listing the “wildcard” exemption. Wilson’s condominium was valued at $250,000 and was subject to a $246,440 mortgage. Wilson listed her exemption as $3,560, the equity in her home as of the petition date. The value of the property increased. In July 2016, Wilson amended her Schedule C, claiming “100% of fair market value, up to any applicable statutory limit,” stating the value of the property at $412,500, and listing Washington’s homestead exemption as the basis for the amended exemption. The bankruptcy court held that an amendment to update the value of an exemption in light of post-petition changes in value was not permitted. The district court and the Ninth Circuit affirmed. Declining to decide whether the definition of the value of exemptions in 11 U.S.C. 522(a)(2) applies to state law exemptions as well as to federal ones, the court concluded that under section 541(a)(1) the debtor’s interests in property transfer to the bankruptcy estate as of the commencement of the bankruptcy action. Following this transfer, any appreciation enures to the bankruptcy estate. The debtor’s exemption was limited to her equity in the property as of the date of her bankruptcy petition.
Court Description: Bankruptcy. The panel affirmed the district court’s decision affirming the bankruptcy court’s refusal to permit a Chapter 7 debtor to amend a bankruptcy schedule to reflect a post-petition increase in the value of property that was the subject of a homestead exemption under Washington law. The panel held that the debtor’s claimed exemption was limited to the amount to which she was entitled under Washington law as of the petition date because, whether claiming federal or state law exemptions, the value of the exemption is fixed by reference to the date of the filing of the bankruptcy petition. Declining to decide whether the definition of the value of exemptions in 11 U.S.C. § 522(a)(2) applies to state law exemptions as well as to federal ones, the panel concluded that § 541(a)(1) makes clear that the debtor’s interests in property transfer to the bankruptcy estate as of the commencement of the bankruptcy action. Following this transfer, any appreciation enures to the bankruptcy estate. Distinguishing cases involving California’s homestead statute, the panel held that, under Washington law, the debtor’s exemption was limited to her equity in the property as of the date of her bankruptcy petition. Dissenting, District Judge Huck wrote that binding Ninth Circuit precedent mandated that when a homestead appreciates in value post-petition, a debtor is entitled to WILSON V. RIGBY 3 amend her homestead exemption claim to include a portion of that appreciation in order to exempt from the bankruptcy estate the maximum amount permitted by state or federal law applicable on the petition date. Judge Huck wrote that the only property subject to exemptions is that which becomes part of the estate. Because post-petition appreciation is an estate asset, it is subject to the maximum applicable homestead exemption irrespective of the amount of the exemption initially claimed by the debtor.
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