SENATE BILL 308
Jacobson, which reversed longstanding
practice.
Imagine being a debtor with a
bankruptcy filing on your credit report
and trying to get a loan to purchase
a home in California’s sky-high-price
market. Freddie Mac and Fannie Mae
deny mortgage credit to bankruptcy
debtors for years after the date of
discharge. Failing to reinvest means
you lose your entire homestead
proceeds to the trustee.
This hits
seniors especially hard because much
of their savings are tied up in their
home. They view their home equity
as a nest egg they can draw on in
their golden years to afford the basic
necessities of life.
Beyond the homeowner’s exemption,
the bill makes some other important
changes to assist financially distressed
individuals. It creates a new state
exemption to help small business
owners claim up to $5,000 for cash or
deposit accounts, accounts receivable
and business inventory for those
debtors using the exemptions under
CCP § 704, et. seq. of the code. This
will allow small business owners to
resume business operations, including
the underemployed and self-employed
trying to bring in more money with
home-based businesses.
The bill boosts the amount of personal
property exemptions available to
debtors, including a bump in the
allowed exemption for motor vehicles
from a paltry $2,900 to $6,000. Since
most debtors are employed at the time
of filing, a dependable vehicle is key to
them keeping their job.
The California Legislature wound
down its session in mid-September
with a flurry of bills, including
climate change, the right-to-die
and medical marijuana regulations.
After clearing the state Senate,
SB 308 bankruptcy reforms came
up short of the necessary votes in
the state Assembly. As supporters
lobbied the Legislature it became
clear more education is needed on
this often complex subject.
Still, there’s plenty of good news
for those who want to bring these
laws up to date. For starters, the
fight continues. The bill can be
approved in the second year of
session, which begins in January.
Also, there are major supporters
of the legislation in statewide and
legislative leadership positions.
California Attorney General Kamala
Harris, State Treasurer John
Chiang, the President pro Tem of
the state Senate, and the current
Speaker and Speaker-elect of the
state Assembly all endorsed SB
308.
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SB 308’s changes to California’s
outdated bankruptcy exemptions
will make sure more boats stay
afloat when the next storm hits.
M. Erik Clark
Borowitz & Clark, LLP
Los Angeles, CA
M. Erik Clark is a partner at Borowitz
& Clark, LLP in Los Angeles and is
an Adjunct Professor at Loyola Law
School.
National Association of Consumer Bankruptcy Attorneys
Winter 2015
CONSUMER BANKRUPTCY JOURNAL
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