Is the amount of home equity shielded by an automatic homestead exemption the threshold for the year a creditor recorded their judgment lien or the year the bankruptcy petition was filed?

Barclay v. Boskoski

Facts: A creditor obtains a money judgment and records a lien against title to an owner’s principal residence. Years later, the owner files a petition for bankruptcy protection and claims an automatic California homestead exemption. When the judgment lien was recorded, the homestead exemption threshold was lower than the lien amount. When the owner filed the bankruptcy petition, the exemption had increased to an amount greater than the judgment lien.

Claim: The owner claims the full amount of their equity in the property is protected up to the increased amount of the current homestead exemption, since they are to receive the homestead exemption amount they are entitled to at the time of filing the bankruptcy petition.

Counterclaim: The creditor claims the owner is protected up to the amount of the exemption available when the lien was recorded since the maximum amount of the exemption available is based on the year the lien was created.

Holding: A federal appeals court for the 9th district covering California holds the homeowner’s equity is exempt from the creditor’s lien amount in the amount of the current homestead exemption since the exemption amount the owner receives is the exemption amount available on the date the bankruptcy petition was filed. [Barclay v. Boskoski (9^th Cir. 2022) 52 F4d 1172]

Barclay v. Boskoski

Related Reading:

Legal Aspects of Real Estate Chapter 33: Automatic and declared homesteads