CA Homestead Exempt and Family Trust

[XiliX]

Hi all -

I am going to be filing a CH.7 no asset in the fall/winter of this year. This is to get rid of over $40k of unsecured credit card debt. This is in California.

I am married, but my filing will be just me.

I currently own a house that's probably valued at around $630,000 and has a mortgage balance of $499,000. We really want to keep our house, and we are current on the mortgage.

I am a little confused on reading the CA exemptions. I know
that in 2010, for married folks it's $100,000. But does that mean I need to file AND my wife needs to file to take advantage of this amount ?

Or since I'll be filing individually, am I limited to the $75k ?

Also, the house is currently in my name only, but I was thinking of either:

1. Adding my wife's name to the title. I want to do this anyway, because if something happens to me, she won't have to deal with the probate mess.

or

2. Setting up a family trust with my wife and I listed as trustees. Are trusts protected from BK ?

Does anyone have an opinion on any of these options ?

I was going to do #1 or #2 above, irregardless of the BK
but if I do this now, is it going to look bad to the BK trustee ?

Thanks for any input,

- Xilix

[LadyInTheRed]

I started reading summaries of CA exemptions and found them confusing when trying to determine whether you can use the entire $100k exemption. So I went directly to the law at http://www.leginfo.ca.gov/cgi-bin/di...04.710-704.850

704.730. (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.

There's more to the code section, but that is what seems relevant.

I think your wife is a person described in paragraph (2), which would give you the entire $100k exemption under the first exemption scheme.

But, you still have $30k in non-exempt equity. Are you certain your house is worth as much as you think it is? What are you basing the value on?

If you make a gift within a year before filing Chap. 7, it is considered a fraudulent transfer and the trustee can take that property back from the recipient.

The assets of a revocable trust (which is probably what you mean by "family trust") are not sheltered from bankruptcy or creditors. The advantage of the trust is to avoid probate after your death and to allow a successor trustee to manage the assets if you and your wife both become unable to do so. Because you would have the power to remove assets from the trust at any time, you are still considered to own those assets.

[XiliX]

LadyintheRed -

Thanks for the info.

I priced our house on Zillow and it came in at $583K. Cyberhomes.com has it at $733K, with a range from $660K-$843K
Then there's a house 5 doors away from me with similiar sq footage, listed for $649 (but hasn't sold - on market for 12 days).

At least it appears I'll qualify for the $100K exemption - that's a relief as I have passed the means test.

I know there are some changes to the BK code coming in April 2010. Does anyone know if the exemptions amounts will be changing ?

- Xilix