New California exemption laws will expand protections for alimony and eliminated a barrier to filing for bankruptcy protection without the involvement of an estranged spouse.
Although not limited to women, in the bulk of cases in my 40+ years of practice, it’s women who will most often benefit from these changes.
Exemptions operate to define assets that a creditor cannot take to satisfy a debt. Exemptions in bankruptcy effectively exclude exempt property from the control of the bankruptcy trustee.
These changes to California law were the work of State Senator Bob Wieckowski, with sponsorship from the National Association of Consumer Bankruptcy Attorneys. They become effective January 1, 2023.
Alimony protected from creditors
In bankruptcy or outside of bankruptcy, the right to receive alimony, support or separate maintenance will be exempt from creditors to the extent necessary for support of the recipient and any dependents. The exemption will be found in a new section, California Code of Civil Procedure 704.111.
Before this amendment, a bankruptcy trustee or any creditor with a judgment could take control of the right to collect unpaid support and pay that money to creditors.
Come Jan. 2023, no more.
Spouse free to make exemption choice
California has two, alternative sets of exemptions that a person filing bankruptcy can elect. One set, found in CCP 704, applies in and outside of bankruptcy. A second set, CCP 703.140, is available only in bankruptcy. A person filing bankruptcy has to choose between the exemption sets.
California’s 703 bankruptcy exemptions are attractive to debtors who don’t have equity in real property, because the exemptions include a generous “wild card” or “grubstake” exemption. The wild card, currently at $29,275, can be used to protect value in any kind of asset, including cash.
Under current law however, a married person filing without their spouse cannot choose the 703.140 exemptions without the consent of their spouse. This was intended to see that a spouse filing bankruptcy alone claimed the house exempt under 704.
The problem arises when the non filing spouse either can’t be found or chooses not to consent to the other spouse choosing the 703 exemptions, including the wild card exemption.
The new amendments solve at least half of that problem by eliminating the need for an estranged spouse’s consent to the election of 703 exemptions, as long as the couple does not jointly own a house that could be claimed exempt under the 704 exemptions with its much larger homestead exemption.
This change will be found at 703.140(a)(2)(B).
These new California exemptions, along with others we’ll explore in later posts, become effective January 1, 2023.