Debra Lea Wilson v. James Rigby; First Citizens Bank

The filing date of a bankruptcy petition determines the

law governing exemptions and freezes the value of the

exemptions that the debtor may claim. Because Debra

Wilson’s amended bankruptcy schedules sought to claim

4 WILSON V. RIGBY

more than Washington law permitted her to claim as of the

petition date, we affirm the district court’s decision, limiting

her claimed exemption to the amount she was entitled to

under Washington law as of the petition date.

I.

Wilson filed her voluntary Chapter 7 petition for

bankruptcy on December 18, 2013. In her initial Schedule C,

Wilson elected to take the federal exemptions and listed the

“wildcard” exemption. At the time the petition was filed,

Wilson’s one-bedroom condominium was valued at $250,000

and was subject to a $246,440 mortgage. Accordingly,

Wilson listed the value of her exemption as $3,560, equal to

the equity in her home as of the petition date. During the

pendency of the bankruptcy, the value of the property

increased. On July 18, 2016, Wilson amended her Schedule

C, claiming “100% of fair market value, up to any applicable

statutory limit,” listing the value of the property at $412,500.

The amended schedule listed Washington’s homestead

exemption as the basis for the amended exemption. The

Trustee, James Rigby, and the Bank, First-Citizens Bank &

Trust Co., opposed the amendments. After oral argument, the

bankruptcy court held that an amendment to update the value

of an exemption in light of post-petition changes in value was

not permitted. Accordingly, the court held that Wilson could

not claim more than $3,560 in the property. Wilson appealed

to the district court, and the district court affirmed the

bankruptcy court. This appeal timely followed.

II.

We review the scope of bankruptcy exemptions de novo.

See Lieberman v. Hawkins (In re Lieberman), 245 F.3d 1090,

WILSON V. RIGBY 5

1091 (9th Cir. 2001). Likewise, we independently review the

bankruptcy court’s decision without deference to the district

court’s decision. Rosson v. Fitzgerald (In re Rosson),

545 F.3d 764, 770 (9th Cir. 2008).

III.

A debtor’s exemptions have long been fixed at “the date

of the filing of the [bankruptcy] petition.” White v. Stump,

266 U.S. 310, 313 (1924); Wolfe v. Jacobson (In re

Jacobson), 676 F.3d 1193, 1199 (9th Cir. 2012) (“Under the

so-called ‘snapshot’ rule, bankruptcy exemptions are fixed at

the time of the bankruptcy petition.”). This rule determines

not only what exemptions a debtor may claim, it also fixes the

value that a debtor is entitled to claim in her exemptions.

Gebhart v. Gaughan (In re Gebhart), 621 F.3d 1206, 1211

(9th Cir. 2010) (noting the well-settled holding in this circuit

“that what is frozen as of the date of filing the petition is the

value of the debtor’s exemption, not the fair market value of

the property claimed as exempt”); see also Hyman v. Plotkin

(In re Hyman), 967 F.2d 1316, 1321 (9th Cir. 1992) (“Were

we to accept the Hymans’ argument that they’re entitled to

post-filing appreciation, we would also have to hold that a

debtor is subject to post-filing depreciation, which would give

debtors in falling property markets less than the $45,000

guaranteed them by state law. Nothing in the bankruptcy law

compels (or even suggests) such a drastic interference with

the operation of the state homestead exemption statute. In

fact, our caselaw strongly suggests the opposite result.”

(emphasis in original)).

This rule is rooted not only in our precedent but in the

bankruptcy code itself. It is expressly identified in 11 U.S.C.

§ 522(a)(2), which defines the “value” of exemptions for

6 WILSON V. RIGBY

purposes of § 522 as “fair market value as of the date of the

filing of the petition or, with respect to property that becomes

property of the estate after such date, as of the date such

property becomes property of the estate.” See id. Amici assert

that this definition of value applies only to the federal

exemptions listed in § 522(d) and lien avoidance in § 522(f)

and not to state law exemptions that may be claimed pursuant

to § 522(b)(3)(A), because the term “value” is not used in

§ 522(b)(3)(A). We need not decide whether Amici are

correct on this point, because 11 U.S.C. § 541(a)(1) makes

clear that “all legal or equitable interests of the debtor in

property” transfer to the bankruptcy estate “as of the

commencement of the case.” Id. (emphasis added). This

transfer of interest is subject to the debtor’s exemptions under

§ 522(b)(1), but the reference point for such exemptions is the

commencement of the bankruptcy action. Following this

transfer, all “[p]roceeds, product, offspring, rents, or profits”

enure to the bankruptcy estate. Id. § 541(a)(6). This includes

the appreciation in value of a debtor’s home. E.g., Schwaber

v. Reed (In re Reed), 940 F.2d 1317, 1323 (9th Cir. 1991)

(interpreting 11 U.S.C. § 541(a)(6) “to mean that appreciation

enures to the bankruptcy estate, not the debtor”).

Accordingly, whether claiming federal or state law

exemptions, the value of the exemption is fixed by reference

to the date of the filing of the bankruptcy petition.

IV.

However, Wilson and Amici assert that a closer look at

the facts underlying earlier Ninth Circuit precedent reveals

that we have consistently allowed debtors to benefit from the

WILSON V. RIGBY 7

post-petition appreciation of their homestead.1 We have not;

let us explain.

The first set of cases cited by Wilson and Amici involved

California’s homestead statute, which differs in material

respects from Washington’s statute. Under California law,

every debtor is entitled to claim an exemption with a fixed

dollar value, based on demographic criteria—

not home equity. See, e.g., Alsberg v. Robertson (In re

Alsberg), 68 F.3d 312, 314 (9th Cir. 1995);

Cal. Civ. Proc. Code § 704.730.2 By contrast,

1 The dissent makes these same arguments; we again reject them.

2 The full text of California’s current statute, which has only changed

in terms of the value assigned to the various demographic categories since

our decision in Alsberg, reads as follows:

(a) The amount of the homestead exemption is one of

the following:

(1) Seventy-five thousand dollars ($75,000) unless the

judgment debtor or spouse of the judgment debtor who

resides in the homestead is a person described in

paragraph (2) or (3).

(2) One hundred thousand dollars ($100,000) if the

judgment debtor or spouse of the judgment debtor who

resides in the homestead is at the time of the attempted

sale of the homestead a member of a family unit, and

there is at least one member of the family unit who

owns no interest in the homestead or whose only

interest in the homestead is a community property

interest with the judgment debtor.

(3) One hundred seventy-five thousand dollars

($175,000) if the judgment debtor or spouse of the

judgment debtor who resides in the homestead is at the

8 WILSON V. RIGBY

Washington applies a sliding scale in which “the homestead

time of the attempted sale of the homestead any one of

the following:

(A) A person 65 years of age or older.

(B) A person physically or mentally disabled who as a

result of that disability is unable to engage in

substantial gainful employment. There is a rebuttable

presumption affecting the burden of proof that a person

receiving disability insurance benefit payments under

Title II or supplemental security income payments

under Title XVI of the federal Social Security Act

satisfies the requirements of this paragraph as to his or

her inability to engage in substantial gainful

employment.

(C) A person 55 years of age or older with a gross

annual income of not more than twenty-five thousand

dollars ($25,000) or, if the judgment debtor is married,

a gross annual income, including the gross annual

income of the judgment debtor’s spouse, of not more

than thirty-five thousand dollars ($35,000) and the sale

is an involuntary sale.

(b) Notwithstanding any other provision of this section,

the combined homestead exemptions of spouses on the

same judgment shall not exceed the amount specified in

paragraph (2) or (3), whichever is applicable, of

subdivision (a), regardless of whether the spouses are

jointly obligated on the judgment and regardless of

whether the homestead consists of community or

separate property or both. Notwithstanding any other

provision of this article, if both spouses are entitled to

a homestead exemption, the exemption of proceeds of

the homestead shall be apportioned between the

spouses on the basis of their proportionate interests in

the homestead.

Cal. Civ. Proc. Code § 704.730.

WILSON V. RIGBY 9

exemption amount shall not exceed the lesser of (1) the total

net value of the [homestead] . . . or (2) the sum of one

hundred twenty-five thousand dollars . . . .” Wash. Rev. Code

§ 6.13.030 (emphasis added).

In both California and Washington, the value of the

homestead must be fixed as of the date of the bankruptcy

petition. In California, the value of the homestead is always

a defined statutory figure. See Cal. Civ. Proc. Code

§ 704.730. However, in Washington, the value is tied to the

equity in the debtor’s home as of the date of the filing of the

petition. See Wash. Rev. Code § 6.13.030. Because the value

that can be claimed in California is determined by

demographic criteria, the homestead amount claimed at filing

may exceed home equity on that petition date. See Alsberg,

68 F.3d at 313–14 (noting that under California law “in effect

at the time of filing [the debtor] was entitled to claim a

homestead exemption of $45,000 on the residence” where the

home equity at the time of filing was only $33,875). If the

home subsequently appreciates, it enures to the California

debtor up to the amount she was entitled to claim under

California law on the petition date. See id. at 313–15

(affirming the BAP’s determination that, upon the sale of the

home, the California debtor was entitled to the full $45,000

exemption even though the equity at the time of the filing was

less than this amount). Accordingly, our cases (that appear to

allow California debtors to obtain post-petition appreciation)

have merely allowed the debtors to receive the full value of

the homestead exemption that they were entitled to claim as

of the petition date. See, e.g., id.; Hyman, 967 F.2d at 1321.3

3 Some of the confusion in this area may stem from the language in

our cases noting that the homestead exemption does not come into play

until the time of a sale. Alsberg, 68 F.3d at 315 (citing Hyman, 967 F.2d

10 WILSON V. RIGBY

Applying Washington law, Wilson is again entitled to the

full value of the homestead exemption she could legally claim

as of the petition date. However, Washington, unlike

California, limits a debtor’s exemption to the equity in her

home. Here, there is no dispute that the “net value” of

Wilson’s home at the time she filed bankruptcy was the

$3,560. That amount was all that Washington’s exemption

statute permitted her to exempt. The fact, that some debtors

in our California cases were permitted to exempt more than

the equity in their homes on the date of their bankruptcy

petitions, does not establish Wilson’s entitlement to do the

same in Washington. Each state is entitled to set the

parameters for its homestead exemption, but in all cases a

debtor is limited to the value that may lawfully be claimed on

the petition date.

Wilson and Amici next cite Klein v. Chappell (In re

Chappell), 373 B.R. 73 (B.A.P. 9th Cir. 2007), aff’d sub nom.

In re Gebhart, 621 F.3d 1206. In Chappell, the BAP

identified the rule that we reaffirm here, noting that

“exemptions are determined on the date of the bankruptcy

and without reference to subsequent changes in the character

or value of the exempt property.” Id. at 77 (alterations in

original omitted) (quoting Culver, LLC v. Chiu (In re Chiu),

266 B.R. 743, 751 (B.A.P. 9th Cir. 2001), aff’d, 304 F.3d 905

(9th Cir. 2002)). The issue in Chappell did not involve the

at 1321). Wilson urges that this language means that the value that she is

entitled to claim as exempt is determined by reference to the sale date,

rather than the petition date. Wilson misreads our cases. We have been

clear that, although a debtor only realizes the exempted value at the time

of sale, her exemption is fixed by the petition date. Hyman, 967 F.2d at

1321 (noting that determining value as of the sale date would subject

debtors in a down market to post-petition depreciation and holding that

this would be inconsistent with our precedent).

WILSON V. RIGBY 11

debtor’s entitlement to post-petition appreciation up to the

statutory maximum, because the trustee had waived that

issue. Id. at 78, 82. The case instead involved whether the

bankruptcy estate retains an interest in the debtor’s home

where the value of the debtor’s homestead exemption equals

or exceeds the equity in the home. See id. at 75–76.

Consistent with our cases, the BAP held that the debtor’s

interest in the home was limited to the dollar value exemption

claimed. See id. at 83. Also, consistent with our cases, the

BAP held that the bankruptcy estate retains an interest in the

debtor’s home such that post-petition appreciation enures to

the bankruptcy estate. See id.

Lastly, Wilson and Amici rely on Woodson v. Fireman’s

Fund Insurance Co. (In re Woodson), 839 F.2d 610 (9th Cir.

1988). Woodson involved an entirely distinct issue from the

one presented here, namely the difference between a debtor’s

right to exempt the ownership interest in a life insurance

policy and the debtor’s exemption rights in life insurance

proceeds. Id. at 617–20. We expressly determined that the

policy and the proceeds were two different assets governed

by two different exemptions. Id. Because the proceeds asset

did not exist at the time the petition was filed, the debtor was

entitled to claim an exemption in the proceeds at the time he

received them. Id. at 621 (permitting the debtor to retain only

that portion of the proceeds, if any, that he was entitled to

exempt under California law). Unlike the two distinct assets

at issue in Woodson, Wilson’s home is the only asset. The

value of that asset may change over time, but it is not

constantly subject to a new round of exemptions as the value

goes up or down.

12 WILSON V. RIGBY

V.

Wilson asserts that our holding will lead to debtors

routinely overvaluing their homes on their bankruptcy

schedules. We remind Wilson that the debtor must act in

good faith, and that nothing about the debtor’s valuation of

the home listed on the schedule is binding on the trustee. Cf.

Schwab v. Reilly, 560 U.S. 770, 782–83 (2010) (Subsection

522(b) “does not define the ‘property claimed as exempt’ by

reference to the estimated market value . . . .” (emphasis

omitted)). If the homestead exemption at issue is tied to the

equity in a home, the trustee will have the burden to examine

the claimed amount to make certain that the trustee need not

object and establish that the claimed exemption is improper.

Here, Wilson is barred from receiving a $125,000

exemption because the trustee timely opposed her amended

exemption. The record is undisputed that the actual equity in

her home on the petition date was $3,560. The date of the

petition is the relevant time frame for valuing the exemption,

and Washington law limits the homestead exemption to a

debtor’s equity.

AFFIRMED.

HUCK, District Judge, dissenting:

The majority’s summation of the relevant facts is accurate

and not in dispute. But the majority’s conclusion that debtor

Wilson’s proposed amended bankruptcy schedules sought to

claim more than Washington’s homestead exemption law

WILSON V. RIGBY 13

permits is, in my view, an incorrect application of Ninth

Circuit precedent. For this and other reasons, I would reverse.

This case presents two issues. First, may Wilson exempt

a portion of her homestead property’s appreciation which

accrued postpetition by increasing her homestead exemption

claim to the maximum amount authorized by Washington

law? And second, if so, may she amend her existing

homestead exemption claim in order to obtain a portion of

that appreciation? Based upon this court’s binding precedent,

as well as the most fundamental bankruptcy principles

applicable to establishing the extent of a debtor’s homestead

exemption, the answer to both questions is yes.

To begin, this court must analyze these issues through the

prism of three fundamental principles: first, that bankruptcy’s

goal to grant the honest but unfortunate debtor a fresh start is

best served by liberally construing homestead exemptions in

favor of debtors, see Schwab v. Reilly, 560 U.S. 770, 791

(2010); second, that bankruptcy courts lack authority to deny

an exemption for any reason not specified in the Bankruptcy

Code (“Code”), see Law v. Siegel, 134 S. Ct. 1188, 1197

(2014); and third, that amendments to bankruptcy schedules,

including those declaring homestead exemptions, are

permitted as of right, see Martinson v. Michael (In re

Michael), 163 F.3d 526, 529 (9th Cir. 1998), abrogated on

other grounds by Law, 134 S. Ct. at 1188. That these

fundamental principles apply here is beyond dispute.

More importantly, binding and on-point Ninth Circuit

precedent mandates that when a homestead appreciates in

value postpetition, a debtor is entitled to amend her

homestead exemption claim to include a portion of that

appreciation in order to exempt from the bankruptcy estate

14 WILSON V. RIGBY

the maximum amount permitted by state or federal law

applicable on the debtor’s filing date. That precedent controls

here and requires reversal.

I. Binding Precedent

A. Alsberg

Robertson v. Alsberg (In re Alsberg), 161 B.R. 680

(B.A.P. 9th Cir. 1993), affirmed by this court in Alsberg v.

Robertson (In re Alsberg), 68 F.3d 312 (9th Cir. 1995), is

directly on point. In Alsberg, the debtor’s homestead property

was appraised at $259,000 when he filed for bankruptcy,

which amount was less than the deed of trust lien ($225,125)

and tax liens ($86,000) encumbering the property. At the

time, California’s maximum homestead exemption was

$45,000. Apparently because Alsberg believed that there was

no equity in the homestead, he did not claim a homestead

exemption in his schedules. However, postpetition, the

homestead appreciated in value and the trustee sold it, netting

$121,000. After the sale, Alsberg amended his B-4 schedule

to claim the $45,000 maximum California exemption.

Alsberg then argued that the trustee was required to abandon

the full $121,000 because at filing there was no equity in his

homestead property for creditors, and therefore, the estate

never had any interest in the property. Alsberg thus “asserted

that he was entitled to any appreciation in the value of the

Property during the pendency of the case.” In re Alsberg,

161 B.R. at 682. On the other hand, the trustee asserted that

Alsberg could not receive any exemption because there was

no equity in the property when Alsberg filed or, alternatively,

that Alsberg’s exemption was capped at $33,875—less than

the full $45,000 California homestead exemption—because

at filing that was the amount of equity in excess of the deed

WILSON V. RIGBY 15

of trust.1 The bankruptcy court disagreed with both parties

and found that Alsberg was entitled to a full homestead

exemption of $45,000, which amount included a portion of

the property’s postpetition appreciation, “because the

amount allowable as a homestead is determined when

property is sold.” Id. (emphasis added).

The bankruptcy appellate panel (“BAP”) affirmed. Id.

The BAP specifically framed the issue as “[w]hether the trial

court correctly held that the appreciation in the value of the

Property during the pendency of the bankruptcy case

belonged to the estate, not to Alsberg.” Id. Finding that

postpetition appreciation initially vested in the estate, the

BAP made the logical subsequent finding: to the extent an

applicable exemption exists, postpetition appreciation, an

estate asset, will be exempted back out of the estate. Id. at

683. Rejecting Alsberg’s claim to all of the postpetition

appreciation, the BAP held: “The Property did become

property of Alsberg’s estate. [Debtor’s] claim of an

exemption only allows him to take back out of the estate the

property representing his exemption.” Id. (alteration added).

Then under the heading “Entitlement to Appreciation,” the

BAP discussed who is entitled to appreciation, and in what

proportions, noting that there were three possible options:

[W]e decide only how much of the remaining

[sale] proceeds Alsberg is entitled to receive

versus how much the estate is entitled to

receive . . . . [The options are:]

1 The bankruptcy court did not consider the tax liens in its calculation

of Alsberg’s homestead equity. In re Alsberg, 161 B.R. at 684 (“We are

not deciding whether Alsberg’s homestead exemption takes priority over

either of the tax lien claims. That issue will be determined separately.”).

16 WILSON V. RIGBY

1. Alsberg gets $33,875, the difference

between the value of the Coast Savings lien

and the value of the Property as of the date

Alsberg filed bankruptcy;

2. Alsberg gets $45,000, the full statutory

amount of his homestead exemption; or

3. Alsberg gets the full $121,000 because,

when he filed bankruptcy, the Coast Savings

lien plus his homestead exemption exceeded

the value of the Property.

Not surprisingly, the Trustee argues for option

number 1 and Alsberg argues for option

number 3. The trial court adopted option

number 2 and we affirm.

Id. at 684. In relevant part, the BAP unequivocally held:

We agree with the trial court’s analysis of the

Ninth Circuit’s decisions in In re Hyman,

967 F.2d 1316 (9th Cir. 1992) and In re Reed,

940 F.2d 1317 (9th Cir. 1991), which hold

that the bankruptcy estate, and not the debtor,

is entitled to post-petition appreciation in

estate assets and that the amount of the

debtor’s homestead exemption is determined

when the subject property is sold rather than

being fixed as of the date the debtor files

bankruptcy. See Hyman, 967 F.2d at 1321;

Reed, 940 F.2d at 1323.

Id. (emphasis added) (footnote call numbers omitted).

WILSON V. RIGBY 17

As shown by the above quote, the BAP, affirmed by this

court, relied on In re Hyman, 967 F.2d 1316 (9th Cir. 1992),

to hold that the homestead exemption amount is determined

at the time of sale. Id. In Hyman, the debtor contended that

his homestead was not an estate asset because its full equity

on his filing date was exempt. In re Hyman, 967 F.2d at 1321.

In rejecting the debtor’s contention, this court stated: “[t]he

California statute gives the Hymans a $45,000 exemption as

of the time of sale, not a $45,000 equity in the property . . . .

The debtor’s right to use the exemption comes into play not

upon the filing of the petition, but only if and when the

trustee attempts to sell the property.”2 In re Alsberg, 68 F.3d

at 314 (quoting In re Hyman, 967 F.2d at 1321) (emphasis

added). Applying this principle, the Alsberg court explained:

“Alsberg’s California homestead exemption can be realized

only from the net proceeds of sale received by the estate . . . .

When Alsberg subsequently filed a claim for a $45,000

homestead exemption after the sale of the property, he

became entitled to $45,000 of the proceeds, and no more.”

Id.

The facts in Alsberg are materially and legally

indistinguishable from the facts here. However, the majority

challenges Alsberg’s authority, asserting that California’s

homestead exemption scheme is materially different from

Washington’s. The majority posits that California’s

exemption entitles every debtor to “claim an exemption with

a fixed dollar value, based on demographic criteria—not

home equity” and “is always the statutory figure.” The

2 And as will be discussed more fully below, the actual amount of a

debtor’s exemption, under California law, as with all capped exemption

laws, will always be determined by the lesser of the exemption cap or the

net proceeds from the sale.

18 WILSON V. RIGBY

majority asserts this is in contrast to Washington’s homestead

exemption, which is materially different because it is “tied to

the equity in the debtor’s home.” This argument fails for at

least three reasons.

First, the distinction which the majority draws between

the Washington and California statutes is illusory because

even though the wording used in each is somewhat different,

that is a difference without legal significance. In fact, the

majority’s attempt to distinguish California’s exemption

because it is “based on demographic criteria—not home

equity” seems to be fashioned from whole cloth. The majority

cites no case, nor have I found any, that has even mentioned,

much less relied on, such a distinction or any other

meaningful distinction.

To the contrary, there is, in my view, no meaningful basis

for treating California’s capped homestead exemption scheme

differently from the federal and other state capped schemes.

More importantly, this court has consistently concurred in

that view. Ninth Circuit caselaw is clear that the legal

principles applicable to the treatment of the homestead’s

postpetition appreciation, which were first established in

cases arising out of California’s exemption statute, are

equally applicable to all other capped exemption statutes.

WILSON V. RIGBY 19

In In re Gebhart, a consolidated appeal,3 this court made

clear that its precedential principles regarding how exempt

property is defined and treated, including treatment of

postpetition appreciation as an estate asset subject to the full

homestead exemption, are not specific to or limited by any

unique feature of the California exemption statute, as the

majority contends. See In re Gebhart, 621 F.3d 1206, 1211

(9th Cir. 2010). Rather, these principles apply to “all statutes

that limit the value of an exemption to an ‘interest’ in

property capped at a dollar value,” such as Arizona’s,

California’s, Washington’s, and the Code’s. Id. Thus, all

capped homestead exemption statutes do not exempt the

homestead property itself, but rather a capped portion of its

equity value, and are subject to the same homestead

exemption principles and analysis. In full, this court

explained:

A number of our cases have held that, under

the California exemption scheme, the estate is

entitled to postpetition appreciation in the

value of property a portion of which is

otherwise exempt. See Alsberg v. Robertson

(In re Alsberg), 68 F.3d 312, 314–15 (9th

Cir.1995); Hyman, 967 F.2d at 1321;

3 As discussed further below, in Gebhart, this court affirmed the BAP

in one case and the district court in another case. See Klein v. Chappell (In

re Chappell), 373 B.R. 73 (B.A.P. 9th Cir. 2007), aff’d sub nom In re

Gebhart, 621 F.3d 1206 (9th Cir. 2010); see also Gebhart v. Gaughan (In

re Gebhart), No. 07-CV-193-PHX-ROS (D. Ariz. Sept. 17, 2007), aff’d

621 F.3d 1206 (9th Cir. 2010). For purposes of this discussion, the

underlying opinion in Chappell will be referred to as Klein v. Chappell

and the underlying opinion in Gebhart will be referred to as Gebhart v.

Gaughan. This court’s opinion in the consolidated case will be referred to

as Gebhart.

20 WILSON V. RIGBY

Schwaber v. Reed (In re Reed), 940 F.2d

1317, 1323 (9th Cir.1991); see also Viet Vu v.

Kendall (In re Viet Vu), 245 B.R. 644, 647–48

(9th Cir.BAP2000).

The fact that the cases cited above dealt

with exemptions claimed under California's

statutory exemption scheme does not limit

their applicability to the cases at bench,

where exemptions were claimed under

Arizona and federal statutes. Reilly has

reaffirmed certain of the underlying principles

in these cases and clarified that, with respect

to how exempt property is defined, their

reasoning is applicable not just to California's

exemption scheme, but to all statutes that

limit the value of an exemption to an

“interest” in property capped at a dollar value.

Moreover, this court's past position on

postpetition appreciation is based not solely

on the California statute defining exempt

property but also on 11 U.S.C. § 541(a)(6)

(including as property of the estate

“[p]roceeds, product, offspring, rents, or

profits of or from property of the estate ...”),

which is equally applicable to the cases at

issue here. See In re Reed, 940 F.2d at 1323;

In re Viet Vu, 245 B.R. at 649.

Id. (emphasis added). Therefore, it cannot be that Alsberg and

other Ninth Circuit cases involving California’s homestead

exemption scheme are legally distinguishable as the majority

posits because, as acknowledged by Gebhart’s clear

language, all capped homestead exemption schemes,

WILSON V. RIGBY 21

including Washington’s, are treated the same. See also Klein

v. Chappell (In re Chappell), 373 B.R. 73, 75 (B.A.P. 9th Cir.

2007) (“Under well-settled Ninth Circuit law, any

postpetition appreciation in value in the residence in excess

of the maximum amount permitted by the exemption statute

invoked inures to the benefit of the estate. The use of federal

exemptions does not work to change that result.”). The

federal homestead exemption statute was at issue in Klein v.

Chappell and the Arizona statute in Gebhart v. Gaughan, yet,

on review, this Court relied on Ninth Circuit cases analyzing

California’s homestead exemption scheme to hold that these

non-California debtors were entitled to retain the postpetition

appreciation in their homesteads up to the statutory

exemption caps. See Gebhart, 621 F.3d at 1211 (analyzing

Alsberg, Hyman, Reed, and Vu). Thus, this court does not

make the distinction which the majority posits.4

Indeed, this court, when discussing whether a California

debtor may obtain postpetition appreciation beyond the

statutory exemption cap, noted the obvious similarity among

all capped exemption statutes by placing them in the same

exemption category and without drawing any distinction

among them: “Of the nine states in the Ninth Circuit, seven

limit the dollar amount of the homestead allowance (Alaska,

Arizona, California, Idaho, Montana, Nevada, and

Washington), while two limit both the dollar and the acreage

4 The demographic criteria in California’s homestead exemption,

upon which the majority places much emphasis, is irrelevant here because

it merely sets forth different exemption caps based on the different

characteristics of the individual or individuals claiming the exemption.

Cal. Civ. Proc. Code. § 704.730. For instance, an unmarried California

debtor may claim $75,000, see Cal. Civ. Proc. Code. § 704.730(a)(1), but

an unmarried California debtor who is over 65 years old may claim

$175,000, see Cal. Civ. Proc. Code. § 704.730(a)(3)(A).

22 WILSON V. RIGBY

amounts of the homestead allowance (Hawaii and Oregon).”

In re Hyman, 967 F.2d at 1319 n.3.

The majority grounds its argument for treating

Washington’s exemption differently than California’s on the

ground that Washington exempts the lesser of either the

homestead’s equity or $125,000. Thus, argues the majority,

while Washington’s exemption is tied to the homestead’s

equity, California’s is not. While it is true that the California

statute does not specifically mention an equity limitation, that

is of neither legal nor economical consequence. That is

because in actual practice, and as a matter of basic

economics, bankruptcy courts in California must, as do all

states with a capped exemption, always cap the exemption at

the lesser of the homestead’s net equity or the designated

maximum because the actual exempted amount will always

be limited to, and can only be paid from, the net proceeds

from the sale of the homestead. See In re Bruton, 167 B.R.

923, 926 (Bankr. S.D. Cal. 1994). Thus, California’s

exemption statute actually means, as does Washington’s, that

the debtor’s exemption amount is the lesser of either the

homestead’s net proceeds at sale or the capped maximum

amount.

In its attempt to distinguish Washington’s exemption

from California’s, the majority also relies on dicta from

Hyman stating that California guarantees debtors a specific

homestead exemption amount. In re Hyman, 967 F.2d at

1321. Unlike taxes and death, however, nothing in

California’s homestead exemption scheme, nor in any other

capped exemption scheme for that matter, guarantees any

amount to the debtor. The only exemption guarantee in

California, and again, as with all capped exemptions, is that

debtors may only exempt and receive their homestead’s

WILSON V. RIGBY 23

equity, if any, up to the maximum statutory exemption

amount. This is obviously the case because regardless of the

maximum exemption the law permits, a debtor may only

receive the exemption amount from the net proceeds

generated by the sale of the homestead. In re Alsberg, 68 F.3d

at 315 (“Alsberg’s California homestead exemption can be

realized only from the net proceeds of sale received by the

estate.”); see also In re Bruton, 167 B.R. at 926 (“The amount

that the debtor may claim as exempt for his homestead is

$50,000 . . . . However, since Bruton has only $16,981 equity

in the property absent HOA’s lien, the available exemption

for purposes of Bankruptcy Code § 522(f) is limited to

$16,981.”). Basic economic reality dictates that if the sale

produces net proceeds in an amount less than the maximum

homestead exemption, the debtor is limited to that lesser

amount. Thus, Hyman’s statement, and the majority’s reliance

on it, that California debtors are guaranteed a $45,000

homestead exemption, aside from being pure dicta, cannot be

accurate in the bankruptcy context.

Second, the majority’s effort to distinguish Washington’s

homestead exemption statute from California’s is also flawed

because it ignores binding precedent involving exemption

statutes other than California’s. This precedent, arising in the

consolidated Gebhart appeals involving federal and Arizona

homestead exemption statutes, permits a debtor to increase

the homestead exemption amount based on postpetition

appreciation—as does California’s statute. Like Washington’s

homestead exemption statute, the federal and Arizona statutes

cap the homestead exemption at a specified maximum

amount. As discussed in detail in the following section, the

courts in both cases which Gebhart affirmed permitted

debtors to claim increased homestead exemptions postpetition

in order to take advantage of their properties’ appreciation

24 WILSON V. RIGBY

under federal and Arizona statutes respectively. See Gebhart,

621 F.3d 1206. The federal homestead exemption statute is,

like Washington’s homestead exemption, clearly a “lesser of

either” capped statute that limits the exemption to “aggregate

interest, not to exceed $23,675 in value . . .” See 11 U.S.C.

§ 522(d)(1) (2018) (emphasis added) (footnote call number

omitted). Arizona’s homestead exemption statute, like

Washington’s, is also clearly a “lesser of either” capped

statute as indicated by the phrase “not exceeding” preceding

the specified cap. See Ariz. Rev. Stat. § 33-1101 (2018)

(“Any person . . . who resides within the state may hold as a

homestead exempt from attachment, execution, and forced

sale, not exceeding one hundred fifty thousand dollars in

value, any of the following . . .”) (emphasis added).

This court is obligated to follow Alsberg, which clearly

establishes that the amount of Wilson’s homestead exemption

is determined at sale, not at filing, and may include a portion

of the homestead’s postpetition appreciation regardless of

what Wilson claimed in her initial schedules.

B. Gebhart

Two other precedential cases adhering to Alsberg were

consolidated in Gebhart, specifically, Klein v. Chappell and

Gebhart v. Gaughan. See Klein v. Chappell, 373 B.R. at 73;

see also Gebhart v. Gaughan, No. 07-CV-193-PHX-ROS.

Although the facts of Klein v. Chappell (involving the federal

exemption statute) and Gebhart v. Gaughan (involving

Arizona’s statute) are somewhat different than here, the

relevant legal principle is not—debtors may exempt

postpetition appreciation from the estate up to the statutory

amount, but no more.

WILSON V. RIGBY 25

In Gebhart, this court framed the “primary issue” as

“whether the Trustee’s failure to object to the homestead

exemption claim within the period allowed by statute resulted

in the homestead property being withdrawn from the

bankruptcy estate at that point.” 621 F.3d at 1209. The court

noted that the consolidated debtors’ respective schedules at

filing represented that there was no equity in the homestead

properties and that the trustees were entitled to rely on

debtors’ representations. Therefore, this court rejected the

debtors’ contention that because trustees failed to timely

object to their exemptions debtors’ entire homestead

properties, which had subsequently appreciated in value, were

excluded from the estates, as opposed to only the capped

homestead exemption amounts. Id. at 1210. This court instead

held that the applicable homestead exemptions removed a

specific dollar amount from the estate, not the property itself,

leaving each trustee entitled to sell the homestead property

notwithstanding his failure to timely object to the homestead

exemption claim. Id. To put it simply, the principal holding

of Gebhart is that a trustee is not bound by the debtor’s

schedules, including the debtor’s evaluation of the homestead

property, and therefore that the debtor cannot prevent the sale

of appreciated homestead property if it has equity in excess

of the maximum exemption amount. And particularly relevant

here, it is noteworthy that this court affirmed the lower

courts, each of which held that even though the debtor was

not entitled to exempt the homestead property itself, the

debtor was entitled to the full homestead exemption amount,

a portion of which was based on postpetition appreciation of

the property, in line with Alsberg. Id.

26 WILSON V. RIGBY

A closer analysis of the underlying cases in Gebhart is

instructive to the issues presented here. In Klein v. Chappell,5

when the husband and wife debtors filed they claimed that

their homestead’s fair market value was $350,000 subject to

liens of $328,488, leaving $21,512 of equity, which they

claimed as their federal homestead exemption. Thus, debtors’

claimed homestead exemption was lower than $36,900, the

maximum permitted under the Code. See § 522(d)(1). Two

years after debtors received their discharge, but while their

case remained open, the debtors’ mortgagee moved to

foreclose on the homestead property because the debtors had

defaulted. In response, the trustee moved the bankruptcy

court for permission to sell the homestead property because

he felt that its value had substantially appreciated. The

debtors argued that the homestead could not be sold because

they, upon filing their petition, had exempted the entire equity

interest in the property, leaving nothing for creditors. The

debtors contended that by doing so they “withdr[e]w the

entire fee from bankruptcy administration.” Klein v.

Chappell, 373 B.R. at 77. The bankruptcy court found for the

debtors, but the BAP reversed. The BAP held that the debtors

were limited to, but also now entitled to, the maximum

homestead exemption amount ($36,900) from the sale

proceeds, even though at filing they had claimed only their

homestead’s then equity of $21,512 and that the estate

retained the remaining sale proceeds. Id. at 83. In doing so,

the BAP held, in accordance with Alsberg: “Under wellsettled

Ninth Circuit law, any postpetition appreciation in

value in the residence in excess of the maximum amount

5 In an effort to avoid the precedential value of Klein v. Chappell, the

majority states that it is a BAP case that is not binding on this court. The

majority fails to take into account that Klein v. Chappell was completely

affirmed by this court in Gebhart. In re Gebhart, 621 F.3d at 1212.

WILSON V. RIGBY 27

permitted by the exemption statute invoked inures to the

benefit of the estate. The use of federal exemptions does not

work to change that result.” Id. (emphasis added). Moreover,

a footnote emphasizes that very point. As the BAP explained:

In Alsberg, Hyman, Reed and Vu the debtors

claimed the maximum amount allowable by

the California exemption scheme. In our case,

the debtors limited their exemption to the

difference between the value stated and the

consensual liens, which was an amount

substantially less than the maximum

exemption available. While postpetition

appreciation in value of property inures to the

benefit of the estate, the estate’s interest in

the appreciation must be limited by the

ability of the debtors to obtain the maximum

value of their federal exemptions. As was

conceded by the trustee at oral argument, the

debtors are jointly entitled to up to $36,900

(plus any available wildcard amount).

Id. at 81 n.7 (emphasis added). Thus, Klein v. Chappell, an

opinion affirmed by this court, again confirms Wilson’s

position. There should be no doubt that Klein v. Chappell

reaffirmed that in the Ninth Circuit, while the homestead and

any appreciation in the homestead initially becomes estate

property, that property is subject to the debtor’s full

homestead exemption, regardless of the amount of the

debtor’s claimed exemption or the homestead’s equity when

the petition is filed.

The majority contends that Klein v. Chappell is not

precedential in that it does not involve a debtor’s entitlement

28 WILSON V. RIGBY

to postpetition appreciation up to the statutory maximum

because the trustee had “waived” that issue. To the contrary,

the trustee, in accordance with what the BAP accurately

termed “well-settled Ninth Circuit law,” “conceded” that the

debtor was entitled to the maximum exemption permitted by

law. See Klein v. Chappell, 373 B.R. at 78, 82–83 (stating,

“As the trustee concedes, the maximum exemption available

under § 522(d)(1) is $36,900 . . .” and “As was conceded by

the trustee at oral argument, the debtors are jointly entitled to

up to $36,900 . . .”) (emphasis added). There is an obvious

and meaningful difference between an informed concession

and a waiver. A concession involves accepting something as

true or acknowledging defeat. A waiver, by contrast, is a

voluntary relinquishment of a right, claim, or privilege. That

the trustee, in the face of “well-settled Ninth Circuit law,”

conceded that the debtors were entitled to the maximum

federal homestead exemption is significant. Id.

Gebhart v. Gaughan, the other underlying case, involves

an Arizona debtor who on his bankruptcy schedules claimed

that his homestead had a fair market value of $210,000 with

liens totaling $120,297.6 On filing, the debtor claimed a

homestead exemption pursuant to Arizona’s homestead

exemption laws for his property’s then equity of $89,703, less

than the $100,000 maximum exemption permitted by Arizona

law. Thus, as did Wilson here, Gebhart initially claimed less

than the maximum exemption permitted by Arizona law

because at filing there was insufficient equity to provide

6 These facts are taken from the district court’s unpublished opinion,

which was not made a part of the record before this panel. This court may

take judicial notice of the district court’s unpublished opinion. See

McQuillion v. Schwarzenegger, 369 F.3d 1091, 1094 n.2 (9th Cir. 2004)

(taking judicial notice of unpublished district court dismissal order).

WILSON V. RIGBY 29

revesting of the full allowable amount from the estate’s sale

of the homestead. As in Hyman, because the schedule facially

reflected no equity in the homestead property in excess of the

exemption claim, the trustee did not object to Gebhart’s

claimed exemption.

Three years after filing, the trustee determined that

Gebhart’s homestead had substantially appreciated in value

and sought to appoint a real estate broker to sell it. Gebhart

objected, contending that he was entitled to the entire

property because at filing he claimed as his exemption the

full equity then existing in the property, thereby leaving

nothing for the estate, and the trustee had failed to object. The

bankruptcy court granted the trustee’s request over Gebhart’s

objections, holding that “a chapter 7 trustee is entitled to the

proceeds from the sale of the debtors’ exempt homestead in

excess of the exempt amount” and that “the excess belongs

to the bankruptcy estate for the benefit of creditors.” Gebhart

v. Gaughan, Case No. 07-CV-193-PHX-ROS at 2. The

district court affirmed:

Because appreciation belongs to the estate, the

bankruptcy court did not err in allowing the

Trustee to proceed with the sale of

Appellant’s homestead. Appellant will receive

his homestead exemption upon sale of the

home but the value of the home above that

amount will be administered by the Trustee.

See In re Hyman, 967 F.2d 1316, 1321 (9th

Cir. 1992) (stating debtor entitled to payment

of full homestead exemption upon sale of

home).

30 WILSON V. RIGBY

Id. at 3 (emphasis added). Following its precedent, this court

affirmed. In re Gebhart, 621 F.3d at 1212.

By affirming both lower courts’ holdings, Gebhart

faithfully followed Alsberg’s unambiguous teaching that:

Under Reilly, an exemption claimed under a

dollar-value exemption statute is limited to

the value claimed at filing. At least when the

total fair market value of the property is in

fact greater than the exemption limit at the

time of filing, see note 4, supra, any

additional value in the property remains

the property of the estate, regardless of

whether the extra value was present at the

time of filing or whether the property

increased in value after filing . . . .

A number of our cases have held that, under

the California exemption scheme, the estate is

entitled to postpetition appreciation in the

value of property a portion of which is

otherwise exempt. See Alsberg v. Robertson

(In re Alsberg), 68 F.3d 312, 314–15 (9th

Cir.1995); Hyman, 967 F.2d at 1321;

Schwaber v. Reed (In re Reed), 940 F.2d

1317, 1323 (9th Cir.1991).

Id. at 1211 (emphasis added).

II. Morgan

Another case, Straffi v. Morgan (In re Morgan), No. 14-

36112 (KCF), 2017 WL 436257, at *1 (D.N.J. Feb. 1, 2017),

WILSON V. RIGBY 31

while obviously not binding precedent, is persuasive not only

because it is so factually similar, but also because it

thoroughly analyzed and, in my view, correctly ruled on both

of the issues presented here: 1) whether a debtor is entitled to

postpetition appreciation to fully fund a homestead

exemption, and 2) whether a debtor has the right to amend her

exemption claim by increasing it to take advantage of that

appreciation. In Morgan, the debtor listed her homestead

value at $125,000 and claimed a $5,601 exemption, the

amount of equity remaining after subtracting a mortgage lien

of $106,898 and estimated sales costs. Later, the trustee

contended that the value of the property was $165,000. In

response, the debtor filed an amended exemption claiming the

maximum of $23,916 and adding another exemption under

section 522(d)(5). The trustee objected to this amendment,

arguing that the debtor may not amend her exemption to take

advantage of the greater homestead value. In response, “[t]he

[d]ebtor explained that, ‘because the Trustee believes my

home is worth more than $125,000.00, I amended my

schedule to claim the maximum available of $23,916.00.’” Id.

at 2. The debtor relied on Law v. Siegel, 134 S. Ct. 1188

(2014), to support her assertion that “she was able to amend

her exemption at any time . . . .” Id. The bankruptcy court

ruled in favor of the debtor, and the district court

affirmed—finding no error in allowing the debtor to amend

her exemption to claim and obtain the full exemption amount.

Id. at *5.

III. Exemption Amount is Not Determined at

Filing

While Gebhart plays a significant role in the resolution of

this case, the majority’s reliance on Gebhart to contend that

exemption amounts are irrevocably fixed on the date of filing

32 WILSON V. RIGBY

is unjustified. To begin, and what is most important to

understand Gebhart, is that in Gebhart this court affirmed the

BAP in Klein v. Chappell and the district court in Gebhart v.

Gaughan, both of which permitted each debtor to,

postpetition, assert an amended maximum homestead

exemption claim in an amount greater than the amount

claimed in the initial schedules, which greater amount

resulted from postpetition appreciation—precisely what

Wilson seeks to do. See In re Gebhart, 621 F.3d at 1212.

The majority’s contention that exemption amounts are

irrevocably fixed on the filing date stems from this partial,

out-of-context statement: “what is frozen as of the date of

filing the petition is the value of the debtor’s exemption, not

the fair market value of the property claimed as exempt.” Id.

at 1211. However, the full statement, in context, reveals a

different meaning:

Under Reilly, an exemption claimed under a

dollar-value exemption statute is limited to

the value claimed at filing. At least when the

total fair market value of the property is in

fact greater than the exemption limit at the

time of filing, see note 4, supra, any

additional value in the property remains the

property of the estate, regardless of whether

the extra value was present at the time of

filing or whether the property increased in

value after filing.

The debtors argue that this conclusion is

inconsistent with the Bankruptcy Code’s

scheme for valuing exempt property. Under

11 U.S.C. § 522(a)(2), “‘value’ [of property

WILSON V. RIGBY 33

sought to be exempt] means fair market value

as of the date of the filing of the petition or,

with respect to property that becomes property

of the estate after such date, as of the date

such property becomes property of the estate.”

The debtors argue that this provision

effectively freezes the value of property

claimed as exempt as of the date of

bankruptcy filing. This argument does not

accord, however, with past holdings of this

court, which establish that what is frozen as of

the date of filing the petition is the value of

the debtor’s exemption, not the fair market

value of the property claimed as exempt. See

Hyman v. Plotkin (In re Hyman), 967 F.2d

1316, 1320 n. 9 (9th Cir. 1992).

Id. (alteration and emphasis added).

The majority interprets the final partial sentence to

support its conclusion that, under Washington’s exemption

scheme, a debtor’s homestead exemption cannot exceed the

amount that a debtor claimed on the filing date, based on the

property’s then-existing equity, even if the homestead

appreciates in value. But the majority’s posited interpretation

cannot be correct for a number of reasons. First and most

obvious, that interpretation stands in sharp contrast to, and is

irreconcilable with, what the Gebhart court actually did.

Rather than freeze the debtors’ exemption amount to the

properties’ equity claimed upon filing, the court permitted the

debtors to postpetition increase their exemption claims up to

the statutory capped amounts and to use a portion of the

properties’ postpetition appreciation to fund those amounts.

The majority’s interpretation is also irreconcilable with

34 WILSON V. RIGBY

Alsberg, precedent upon which the Gebhart court relied in

determining how postpetition appreciation is treated. Id.

Tellingly, the majority’s interpretation of that partial

statement ignores the court’s full discussion indicating, in

conformance with precedent, that when a homestead

appreciates postpetition, the appreciation inures to the estate,

but “a portion is otherwise exempt.” Id. For example, the

discussion preceding that partial statement informs as to its

true meaning. There, the court observes that a dollar value

exemption is limited to the exemption that debtor claimed at

filing, but only “when the total fair market value of the

property is in fact greater than the exemption limit at the time

of filing . . . any additional value in the property remains the

property of the estate regardless of whether the extra value

was present at the time of filing.” Id. In other words, when a

debtor claims the maximum allowed exemption and at filing

there is sufficient value to cover that amount, the debtor’s

exemption is frozen and he is not entitled to any of the

property’s appreciation. Conversely, it follows that if at filing

there is insufficient value to meet the maximum exemption,

the debtor is entitled to a portion of any appreciation up to the

maximum exemption. This interpretation not only takes into

account the Gebhart court’s full discussion and what it

actually did, but is also the only interpretation consistent with

Alsberg and the other precedent which the Gebhart court

cited with approval.

Moreover, the statement that exemptions are frozen on the

filing date must be analyzed in the factual context in which it

was made. Thus, it is important to note that the determinative

issues in Wilson’s case are different than those in Gebhart,

keeping in mind that the court was discussing and ultimately

rejecting the debtors’ contention that section 522(a)(2)

WILSON V. RIGBY 35

“freezes the value of property claimed as exempt as of the

date of the bankruptcy filing” so that the estate was not

entitled to any postpetition appreciation. Id. (emphasis

added). In both of Gebhart’s two consolidated cases, the

debtors contended that the trustees had effectively abandoned

the homestead properties because the trustees did not object

to debtors’ homestead exemption claims which claimed all of

the properties’ purported equities at filing, which amounts

were less than the maximum allowed homestead exemptions.

Thereafter, the debtors claimed the appreciated properties

themselves, the values of which had substantially increased

to amounts greater than the statutory exemption cap. The

ultimate issue in Gebhart was whether the trustees were

entitled to the postpetition appreciation which exceeded the

statutory cap such that they could sell the homestead

properties or whether, instead, the debtors were entitled to all

of the appreciation such that the trustees would have no

interest in the homestead properties. In that different context,

Gebhart held in both cases that the trustee did not have to

object to the debtor’s schedules which represented no value

in the homestead property above the exemption claim, that

the property was still estate property, and “the estate [was]

entitled to postpetition appreciation in the value of property

a portion of which [was] otherwise exempt.” Id. at 1211

(citing In re Alsberg, 86 F.3d at 314–15). The court must read

the full context of Gebhart together with pre-existing

precedent and what the Gebhart court actually did in order to

fully understand what the Gebhart court meant by the isolated

statement, “what is frozen as of the date of filing the petition

is the value of the debtor’s exemption.” In re Gebhart,

621 F.3d at 1211.

It is also noteworthy that the Gebhart court credits its

statement to Hyman, where husband and wife debtors claimed

36 WILSON V. RIGBY

the maximum statutory exemption amount when initially

asserting their homestead exemption and then postpetition

claimed the appreciated property itself. In re Hyman,

967 F.2d at 1318. The court found for the trustee, holding that

the debtors’ interest was limited to their monetary interest

permitted by the homestead exemption. Id. at 1321. Because

the Hyman debtors had already claimed the maximum

$45,000 homestead exemption, debtors were not entitled to

exempt any more. Id. at 1318. That is, debtors’ exemption

was frozen at the statutory cap upon filing. As the court

explained:

The Hymans only claimed a $45,000

homestead exemption. See page 1318 supra.

That figure is fixed “as of the date of the

filing the petition.” 11 U.S.C. § 522(a)(2).

However, nothing in section 522, or anywhere

else in the Bankruptcy Code for that matter,

requires that non-exempt assets have their

values frozen on the petition date.

Id. at 1320 n.9 (emphasis added). It is this language from

Hyman to which Gebhart refers. The full context in which it

was made clearly does not support the majority’s view that

Wilson may not benefit from postpetition appreciation in

order to obtain her full exemption. To the contrary, context

explains how the “fixed at filing” language is fully

compatible with Wilson’s position here. The estate is entitled

to the homestead’s appreciation that is not otherwise exempt,

in line with this court’s precedent, including Alsberg and

Gebhart.

It is also significant that Washington’s homestead

exemption law, consistent with Ninth Circuit precedent,

WILSON V. RIGBY 37

provides that the relevant time to determine and disburse a

debtor’s homestead exemption amount is when the property

is sold. Sweet v. O’Leary, 88 Wash. App. 199, 200 (1997)

(“The homestead exemption creates an interest in property

that attaches to the surplus proceeds from a nonjudicial

foreclosure sale under a deed of trust such that a judgment

creditor’s claim is limited to funds in excess of the

homestead, if any.”). Washington’s homestead exemption is

capped at the lesser of “the total net value of the lands . . . or

(2) the sum of one hundred twenty-five thousand dollars . . .”

Wash. Rev. Code § 6.13.030 (emphasis added). Washington

defines “net value” as “market value less all liens and

encumbrances senior to the judgment being executed upon

and not including the judgment being executed upon.” Wash.

Rev. Code § 6.13.010. Thus, Washington contemplates that

the value of its homestead exemption is determined upon

execution of a judgment against homestead property, or in the

bankruptcy context upon trustee’s sale, and is limited to the

lesser of the net proceeds from the sale or $125,000. Id.;

Wash. Rev. Code § 6.13.030. According to Washington law,

then, the proper value of the exemption amount is determined

at sale, not at filing. 7 Washington’s approach is wholly

consistent with this court’s adoption of the general principle

that exemption amounts are determined at sale rather than at

filing. In re Hyman, 967 F.2d at 1318 (explaining that under

California’s homestead exemption scheme, “[i]f the sale price

7 Washington’s homestead exemption law exempts, upon sale, a

maximum of $125,000 in homestead equity from judgment creditors’

reach, and per Hyman, the same treatment applies in the bankruptcy

context. In re Hyman, 967 F.2d at 1319 (concluding that pursuant to

section 522(b)(3)(a)’s deference to state law homestead exemptions,

bankruptcy petitioners under federal law are treated as judgment debtors

and are entitled to exempt any “property qualifying under California’s

homestead exemption statute.”).

38 WILSON V. RIGBY

does exceed [the total of the homestead exemption and

encumbrances on the property] the homestead may be sold

and the judgment debtor is entitled to a sum equal to his

homestead exemption from the proceeds of the sale.”)

(alteration added). Thus,

In the normal situation where section 704.800

is called into play—a sale of property to

satisfy a judgment lien—the concept of an

interest that fluctuates in value makes no

sense because all the relevant events occur on

the date of sale. Only in the bankruptcy

context, where an appreciable period of time

usually passes between filing of the petition

and sale of the property, can the property rise

or fall in value. Yet, we see no basis for

treating a sale by a trustee in bankruptcy any

different from a sale by a judgment

lienholder. The debtor’s right to use the

exemption comes into play not upon the filing

of the petition, but only if and when the

trustee attempts to sell the property.

Id. at 1321. Consistent with Hyman, the Alsberg court held:

Alsberg’s California homestead exemption

can be realized only from the net proceeds of

sale received by the estate. The estate held an

interest in the residence at all times after the

petition was filed. Therefore, when the

residence was sold, the proceeds of the sale

vested in the estate. When Alsberg

subsequently filed a claim for a $45,000

homestead exemption after the sale of the

WILSON V. RIGBY 39

property, he became entitled to $45,000 of the

proceeds, and no more.

In re Alsberg, 68 F.3d at 315; see also In re Bruton, 167 B.R.

at 926.

In view of all this, the majority’s overly literal

interpretation of that out-of-context statement from Gebhart

regarding freezing exemptions cannot be justified.

Further, here, unlike the Gebhart debtors, Wilson does

not contend that the value of her homestead property was

frozen upon filing or that she is entitled to all postpetition

appreciation. Rather, Wilson agrees that the property’s value

has appreciated, and she seeks only the amount of her capped

homestead exemption, not her homestead property nor its

appreciated equity in excess of the exemption cap.

In the final analysis, section 522(b)(3)(A), which allows

debtors to use state exemption statutes, must be construed

liberally in favor of Wilson. See Culver, LLC v. Chiu (In re

Chiu), 266 B.R. 743, 747 (B.A.P. 9th Cir. 2001), aff’d,

304 F.3d 905 (9th Cir. 2002) (“It is well-established that

§ 522 is to be interpreted liberally in favor of debtors in order

to facilitate their ‘fresh start.’”). A liberal construction of

section 522(b)(3)(A) and Washington’s homestead exemption

statute requires that Wilson’s exemption amount be fixed at

sale, not at filing.

IV. Postpetition Appreciation Inures to the Estate

The majority also relies on the rather unremarkable

principle that postpetition appreciation in estate property

inures to the estate as support for not allowing Wilson to

40 WILSON V. RIGBY

amend her exemption schedule to claim a portion of that

appreciation. Certainly, the principle that postpetition

appreciation inures to the estate is well-established. See

Schwaber v. Reed (In re Reed), 940 F.2d 1317, 1323 (1991)

(“We interpret [§ 541(a)(6)] to mean that appreciation inures

to the bankruptcy estate, not the debtor.”); In re Alsberg,

68 F.3d at 314–15; In re Viet Vu, 245 B.R. 644, 648 (B.A.P.

9th Cir. 2000) (“[T]he estate is entitled to postpetition

appreciation”). In fact, a trustee’s ability to sell appreciated

homestead property stems from the concept that postpetition

appreciation initially inures to the estate. See In re Gebhart,

621 F.3d at 1210. However, the majority draws a faulty

conclusion from this limited principle.

The majority is correct that section 541(a)(1) defines one

category of estate property to include, “all legal or equitable

interests of the debtor in property as of the commencement of

the case.” However, the majority treats the estate’s

postpetition category of property defined in section 541(a)(6)

differently by classifying it as property that may never be

exempted from the bankruptcy estate, notwithstanding that

section 541(a)(6) is part of the list of all properties which

section 541(a) includes as “property of the estate.” Section

541(a) states: “The commencement of a case under . . . this

title creates an estate. Such estate is comprised of all of the

following property, wherever located and by whomever

held.” Section 541(a)(6), the sixth category of that estate

property, includes: “proceeds, product, offspring, rents, or

profits of or from property of the estate . . .” The majority

acknowledges that “proceeds, product, offspring, rents, or

WILSON V. RIGBY 41

profits,” which without question includes appreciation,8 are

part of the bankruptcy estate, but curiously concludes that

only the debtor’s property that transfers to the estate at filing,

rather than the debtor’s property which transfers postpetition,

is subject to exemptions under section 522.

The majority’s position is not supported by statute or

caselaw. To the contrary, as discussed above, prohibiting a

debtor from exempting postpetition appreciation from the

estate contravenes binding precedent.

To say that debtor’s property, including its appreciation,

vests in the estate, says nothing about the debtor’s right to

revestment of a portion of the net proceeds from the sale of

that property pursuant to debtor’s homestead exemption. This

is because all of debtor’s property, including appreciation,

must initially inure to the estate before the proceeds from the

sale of such property may ultimately be distributed to those

claiming an interest in the estate property, e.g., creditors, and,

of course, debtors, by virtue of exemption or abandonment.

It is axiomatic that the only property subject to exemptions is

that which becomes part of the estate, but no statute or

caselaw limits a debtor’s right to exempt only that property

which entered the estate at the commencement of the

bankruptcy proceeding. See 11 U.S.C. § 522(b)(1). Thus,

8 Gebhart makes clear that postpetition appreciation becomes an

estate asset pursuant to section 541(a)(6). In re Gebhart, 621 F.3d at 1211

(“[T]his court’s past position on postpetition appreciation is based not

solely on the California statute defining exempt property but also on

11 U.S.C. § 541(a)(6) (including as property of the estate ‘[p]roceeds,

product, offspring, rents, or profits of or from property of the estate ...’),

which is equally applicable to the [non-California] cases at issue here.”).

Thus, postpetition appreciation comes into the estate by virtue of section

541(a)(6).

42 WILSON V. RIGBY

“[t]he effect of an exemption is that the debtor’s interest in

the property is ‘withdrawn from the estate (and hence from

the creditors) for the benefit of the debtor.’” In re Gebhart,

621 F.3d at 1210 (quoting Owen v. Owen, 500 U.S. 305, 308

(1991)); see also In re Morgan, 2017 WL 436257 at *4 (“The

Orton and Gebhart courts both held that postpetition

appreciation was property of the estate and, therefore, may

properly be exempted by a debtor.”). Nothing in section 522

limits a debtor from exempting an interest in estate property

acquired postpetition if an applicable exemption exists. See

§ 522.

It follows that because postpetition appreciation is an

estate asset, it is then subject to the maximum applicable

homestead exemption irrespective of the amount of the

exemption initially claimed by debtor. Gebhart, in affirming

both the lower courts, applies this principle, recognized by

this court in Alsberg, when holding that: “the estate is entitled

to postpetition appreciation in the value of property a portion

of which is otherwise exempt.” In re Gebhart, 621 F.3d at

1211 (emphasis added).

Applying these concepts here, Wilson’s homestead

property, with its postpetition appreciation, is unquestionably

property of the estate, $125,000 of which should be revested

to her by virtue of her allowable homestead exemption.

Because estate property, including its appreciation, is

subject to exemptions, even though Wilson had not initially

claimed Washington’s maximum exemption amount, she may

now claim the full exemption nonetheless. Thus, permitting

Wilson to amend her schedules to assert Washington’s full

homestead exemption is required by the Code’s text and this

court’s binding precedent. Moreover, permitting Wilson to

WILSON V. RIGBY 43

assert her full exemption on estate property, including its

postpetition appreciation, fairly promotes the bankruptcy

fresh start policy.

V. The “Snapshot” Rule

In what has been labeled the “snapshot rule” through

caselaw, section 522(b)(3)(A) states that “exemptions must be

determined in accordance with the state law ‘applicable on

the date of filing.’” In re Jacobson, 676 F.3d 1193, 1199 (9th

Cir. 2012) (quoting § 522(b)(3)(A) (exempting from property

of the estate “any property that is exempt under . . . State or

local law that is applicable on the date of the filing . . .”)

(emphasis added)). The majority contends that the “snapshot

rule” directly supports its position that the claimed amount of

the exemption, as opposed to only the right to assert a specific

exemption claim, is indelibly fixed at filing. The majority’s

interpretation of the snapshot rule is an unjustified extension

of that rule as applied by the caselaw on which the majority

relies. Moreover, that interpretation runs counter to the three

basic principles applicable to exemption statutes:

1) exemption statutes must be liberally interpreted in favor of

debtors; 2) an exemption may not be denied in the absence of

an explicit provision to do so; and 3) courts must permit

debtors to amend their bankruptcy schedules as a matter of

course.

While it is accurate that the court in Jacobson stated that

“[u]nder the so-called snapshot rule, bankruptcy exemptions

are fixed at the time of the bankruptcy petition,” 676 F.3d at

1199, Jacobson and White v. Stump, 266 U.S. 310 (1924), the

other case upon which the majority relies, do not support the

majority’s extension of the snapshot rule. This is because in

those cases the courts did not discuss, much less decide,

44 WILSON V. RIGBY

whether the amount of the debtor’s exemption is fixed at

filing, but rather only whether the debtor qualified for a

particular homestead exemption in effect at filing.

As made abundantly clear in discussing the snapshot rule,

this court, relying on section 522(b)(3)(A)’s specific mandate,

explained that state homestead exemptions “must be

determined in accordance with the state law ‘applicable on

the date of filing’” and that courts must look to that law to

determine “whether an exemption applies.” In re Jacobson,

676 F.3d at 1199 (quoting § 522(b)(3)(A)). In Jacobson, the

debtors did not qualify for the exemption because they did not

reinvest the proceeds from the sale of their homestead

property within six months, as required by California law. Id.

Because the debtors failed to comply with state law as it

existed on the date of filing, the court found that they

forfeited the exemption. Id. As with Jacobson, the majority

overstates the actual, limited holding in White. There, the

Supreme Court simply held that a debtor could not assert a

homestead exemption when the property did not qualify for

exemption at the time of filing. White, 266 U.S. at 314. White

did not mention, much less rule on, whether the amount of an

exemption is fixed at filing or whether a debtor could

postpetition increase the dollar amount of a homestead

exemption claim based on appreciation. Id.

Neither of the majority’s cases speaks to the issues

presented here. Tellingly, the majority cites no case, and I

have found none, which has extended the snapshot rule to

freeze the amount of an exemption at filing. And in my view,

any such extension would be inconsistent with a liberal

interpretation of section 522(b)(3)(A) in favor of the debtor.

More to the point, the extension of the snapshot rule as

posited by the majority—that the amount of debtor’s

WILSON V. RIGBY 45

exemption claim at filing may not be amended to reflect

postpetition appreciation—ignores this court’s precedent to

the contrary.

This court has explained that in applying a state

homestead exemption statute, courts should look to “clearly

defined rights with respect to” the statute. Id. With respect to

Washington’s exemption statute, it does not, nor does the

Code for that matter, provide that a homestead exemption is

limited to the amount claimed at filing or set a deadline for

asserting the full exemption. To the contrary, as discussed

above, Washington’s homestead exemption is determined by

and is applied to the “surplus proceeds from a . . . sale . . .

such that a judgment creditor’s claim is limited to funds in

excess of the homestead, if any.” Sweet, 88 Wash. App. at

200. The snapshot rule, as properly construed, is not relevant

here because at the time Wilson filed her petition, the

exemption for which she qualified read the same as it does

today: “the homestead is exempt from attachment and from

execution or forced sale for the debts of the owner up to the

amount specified in RCW 6.13.030.” Wash. Rev. Code

§ 6.13.070. Moreover, nothing in Washington’s homestead

exemption statute tethers the homestead exemption amount

to the bankruptcy filing date. See Wash. Rev. Code

§ 6.13.030. Consequently, the majority’s position that

Wilson’s homestead exemption was limited to $3,560

because exemption amounts are fixed at filing is flawed.

VI. Guiding Bankruptcy Principles

As indicated above, there are three undisputed

fundamental principles which must guide the court’s analysis

here, none of which have been discussed, much less taken

into account, by the majority or the courts below.

46 WILSON V. RIGBY

First, the overarching and well-established purpose of the

bankruptcy scheme is to “grant a fresh start to the honest but

unfortunate debtor.” Marrama v. Citizens Bank of Mass.,

549 U.S. 365, 367 (2007) (internal quotations omitted). To

that end, exemptions play a critical role. “[E]xemptions in

bankruptcy cases are part and parcel of the fundamental

bankruptcy concept of a ‘fresh start.’” Schwab, 560 U.S. at

791 (citations omitted). This court dutifully recognizes the

significance of exemptions and, consequently, adheres to a

strong policy of interpreting exemptions “liberally in favor of

debtors.” See In re Chiu, 266 B.R. at 747 (“It is wellestablished

that § 522 is to be interpreted liberally in favor of

debtors in order to facilitate their ‘fresh start.’”); see also In

re Arrol, 170 F.3d 934, 937 (9th Cir. 1999) (“[W]e are

mindful of the strong policy underlying both California law

and federal bankruptcy law to interpret exemption statutes

liberally in favor of the debtor.”) (alteration added).

An analysis of the permissibility of Wilson’s proposed

postpetition amendment must be guided by the wellestablished

fresh start and liberal-construction-of-exemptions

mandates. How better to assist an honest but unfortunate

debtor’s fresh start than to permit her to claim the maximum

applicable statutory homestead exemption amount? It is

noteworthy that Wilson, unlike the debtors in Hyman,

Alsberg, Klein v. Chappell, and Gebhart v. Gaughan, seeks

to obtain no more than the full exemption amount which the

homestead exemption statute permitted when she filed.

Second, bankruptcy courts may not deny a debtor’s

exemption on a ground not specified in the Code. Law, 134 S.

Ct. at 1197. In Law, the Supreme Court, in finding that the

bankruptcy court lacked authority to sanction a debtor by

surcharging, and thus reducing, his homestead exemption

WILSON V. RIGBY 47

amount after the debtor committed overt fraud on the

bankruptcy court, explained that: “A debtor need not invoke

an exemption to which the statute entitles him; but if he does,

the court may not refuse to honor the exemption absent a

valid statutory basis for doing so.” Id. at 1196. As discussed

elsewhere, there is no valid statutory basis for not honoring

Wilson’s right to her full exemption.

Third, Federal Rule of Bankruptcy Procedure 1009 grants

debtors the right to freely amend their bankruptcy petitions,

including their exemption schedules. The rule states: “A

voluntary petition, list, schedule, or statement may be

amended by the debtor as a matter of course at any time

before the case is closed.” Fed. R. Bankr. P. 1009. “This right

to amend includes the right to amend the debtor’s list of

property claimed exempt.” In re Goswami, 304 B.R. 386, 393

(B.A.P. 9th Cir. 2003) (“The approach we adopt in this case

is consistent with the Ninth Circuit’s policy of liberally

allowing debtors to amend their exemption schedules so as to

enhance their fresh start.”) (citing In re Michael, 163 F.3d at

529). “The bankruptcy court has no discretion to disallow

amended exemptions, unless the amendment has been made

in bad faith or prejudices third parties.” In re Arnold,

252 B.R. 778, 784 (B.A.P. 9th Cir. 2000). As the Supreme

Court noted, “[T]o disallow an exemption [] or to bar a debtor

from amending his schedules to claim an exemption . . . is

much the same thing . . .” Law, 134 S. Ct. at 1196.

Importantly, in Michael, this court expressly held that,

pursuant to a debtor’s right to freely amend under Bankruptcy

Rule 1009(a), a debtor may amend her bankruptcy schedules

to claim a homestead exemption for the first time

postpetition. In re Michael, 163 F.3d at 528 (permitting

debtors to amend bankruptcy schedules to claim homestead

exemption more than one year after the date of filing).

48 WILSON V. RIGBY

The denial of Wilson’s right to amend her exemption

claim in order to obtain Washington’s maximum homestead

exemption to which she is entitled is an impermissible denial

of a substantial portion of Wilson’s homestead exemption.

Nothing in the Code limits the amount of a debtor’s state law

homestead exemption to the amount of equity claimed in the

property on the filing date. Moreover, denying Wilson’s right

to amend is inconsistent with Michael and Bankruptcy Rule

1009(a). In contrast to the majority’s position that a debtor’s

exemption amount is always limited to the amount claimed at

filing, this court in Michael was intent on “implement[ing]

the policy of liberally allowing the debtors to amend their

exemption claims in order to enhance their fresh start.” In re

Michael, 163 F.3d at 529. It is counterintuitive and an

illiberal interpretation of the exemption laws to hold that a

debtor may amend her bankruptcy schedules to claim a

homestead exemption for the first time postpetition, as

permitted in Michael, but to deny a debtor the right to amend

her bankruptcy schedules to postpetition increase her

homestead exemption claim. Both scenarios allow a

postpetition amendment and a greater exemption for the

debtor.

In an attempt to justify denying Wilson’s full exemption,

the majority relies on section 522(a)(2)’s term-of-art

definition of “value” to support fixing the exemption amount

to the equity amount claimed on the filing date. Such reliance

is ill advised for a number of reasons, not the least of which

is the section’s clear language. While section 522(a)(2)

provides that “in this section, ‘value’ means fair market

value as of the date of the filing of the petition,” the word

“value” is noticeably absent from, and thus inapplicable to,

section 522(b)(3)(A), which authorizes debtors to utilize state

law exemptions rather than federal exemptions. § 522(a)(2)

WILSON V. RIGBY 49

(emphasis added). In contrast, section 522 includes the word

“value” in several other irrelevant federal exemption sections,

such as within section 522(d)(2), which federally exempts a

“debtor’s interest, not to exceed $3,775 in value, in one motor

vehicle.” § 522(d)(2). That the defined term “value” is

present in some sections but not section 522(b)(3)(A), the

only section relevant here, clearly indicates that the defined

term “value” plays no role in Wilson’s homestead exemption

analysis. See Conn. Nat’l Bank v. Germain, 503 U.S. 249,

253–54 (1992) (“We have stated time and again that courts

must presume that a legislature says in a statute what it means

and means in a statute what it says there.”). In fact, the only

limitation in the Code on a debtor’s right to exempt property

under state law is that the exemption statute must be

“applicable on the date of the filing of the petition to the

place in which the debtor’s domicile has been located” for a

period of time prior to filing. § 522(b)(3)(A). Moreover,

nothing in section 522 limits exemptions to property that

entered the estate on the filing date, as opposed to property

that entered the estate postpetition. See gen. § 522. Thus,

nothing in section 522, or anywhere else in the Code, limits

Wilson’s right to amend her schedules to claim and receive

her full homestead exemption amount, which may include

some postpetition appreciation.

For all of these reasons, I would reverse to allow Wilson

to amend her homestead exemption claim in order for her to

obtain the full exemption to which she is entitled.

Affirmed