491 B.R. 132
Bankr. E.D. Cal.2013Background
- Trustee objects to debtor's exemption of 1845 Hidden Hills Drive short-sale incentives from the creditor's lien.
- Debtor claimed exemption under California CCP 703.140(b)(5) for proceeds/concessions from a potential short-sale.
- Trustee argues the asserted asset does not exist at filing and the incentive payments arise from post-petition activities of the estate.
- Debtor argues 11 U.S.C. § 541 broadens estate property to include preexisting rights to negotiate a short-sale and receive concessions.
- Court analyzes whether the claimed asset existed at filing, complies with §541, and whether California exemptions apply to the incentive payments.
- Court sustains the Trustee's objection, finding no exempt interests in the claimed asset and clarifying debtor rights to negotiate a short-sale remain with the Trustee's estate
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May debtor exempt short-sale incentives as estate property? | Roberts: asset not in estate at filing | Bunn-Rodemann: §541 broad; rights existed at filing | Exemption denied; no estate asset on exemption |
| Do California exemptions apply to the debtor’s post-petition rights tied to a short-sale? | Exemptions apply only to involuntary liens; consensual lien shielding asset not exempt | Exemption scope broader under California law | Exemption not available for these rights |
| Who controls estate assets for a short-sale and incentive payments—the Trustee or the Debtor? | Trustee controls and may pursue incentive payments | Debtor retains no rights to sell; Trustee handles sale | Trustee may pursue and administer the short-sale and incentive payment; debtor cannot exempt |
Key Cases Cited
- In re Pavich, 191 B.R. 838 (Bankr.E.D. Cal. 1996) (exemption limits under state law; liens and exemptions interplay)
- In re Farmers Markets, Inc., 792 F.2d 1400 (9th Cir. 1986) (§541 scope and avoidance of nonexisting assets at filing)
- Owen v. Owen, 500 U.S. 305 (U.S. 1991) (exemption rights fixed at filing date; postpetition increases not exempt)
- In re Gebhart, 621 F.3d 1206 (9th Cir. 2010) (clarifies estate property and exemption boundaries under §541)
- The referenced Hyman decision, 967 F.2d 1316 (9th Cir. 1992) (limitations on exemptions and what constitutes property of the estate)