Salven v. Galli (In re Pass)

Former husband of bankrupt spouse could raise his homestead exemption to oppose the bankruptcy trustee’s motion to sell the property free and clear, since the former husband resided in the home at the time the former wife filed her bankruptcy petition.  Under California law (CCP 704.720), a debtor has an automatic homestead exemption in a home he owns and lives in.  The exemption prevents any forced sale of the property, including a bankruptcy sale, unless the sale proceeds are sufficient to pay the homeowner the amount of the exemption first, leaving any remaining sale proceeds for creditors.  This decision holds that the former husband of the bankrupt spouse could oppose the bankruptcy trustee’s motion to sell the property free and clear under 11 USC 363, raising his homestead exemption since the former husband resided in the home at the time the former wife filed her bankruptcy petition.  The decision also points out that the added protections gained from an express homestead declaration under CCP 704.950 are not relevant in the bankruptcy context.

Ninth Circuit Court of Appeals Bankruptcy Appellate Panel (Dunn, J.); August 1, 2016; 2016 WL 4136505

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