The “snapshot rule” holds that exemptions are fixed as of the date the debtor files his or her bankruptcy petition (the “petition date).  The rule is based on two decisions of the United States Supreme Court:  White v. Stump, 266 U.S. 310 (1924), and Myers v. Matley, 318 U.S. 622.

In the Ninth Circuit, the snapshot rule can produce bad results for Chapter 7 debtors.  In Earl v. Lund Cadillac, LLC (In re Earl), 2017 U.S.App. LEXIS 23914,[1] the Ninth Circuit Court of Appeals, without the benefit of oral argument, applied the snapshot rule to a debtor who filed a bankruptcy petition (originally a Chapter 13, then converted to Chapter 7) with two parcels of residential property.  One property was the debtor’s residence at the petition date (the “Residence”), and she claimed a homestead in the Residence under the Arizona homestead statute.  The debtor also owned a rental house (the “Rental Property”).  The debtor was unable to stop a pending foreclosure of her Residence, and amended her schedules to claim a homestead in the Rental Property. 

As the court noted, Bankruptcy Rule 1009(a) holds in part that “[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.”

But the Earl court applied the snapshot rule to deny the debtor a homestead in the Rental Property:

“Whether Debtor can amend her petition to claim an exemption in the (former rental property) is controlled by the “snapshot rule,” which provides that ‘bankruptcy exemptions are fixed at the time of the bankruptcy petition.’”[2] 

In Earl, because the debtor did not live in the Rental Property at the petition date, she could not later claim a homestead in the Rental Property even if she later moved into it and occupied it as her primary residence.

In summary, in the Ninth Circuit, the old adage that “you can’t un-ring the bell” applies to homestead exemption claims made by Chapter 7 debtors.

“Whether Debtor can amend her petition to claim an exemption in the (former rental property) is controlled by the “snapshot rule,” which provides that ‘bankruptcy exemptions are fixed at the time of the bankruptcy petition.’”[1] 

 
[1] Earl, citing In re Jacobson, 676 F.3d 1193, 1199 (9th Cir. 2012), which cites White v. Stump, 266 U.S. 310 (1924).  In Jacobson, the Ninth Circuit ruled that where state law had a reinvestment rule for homestead proceeds, that failure to timely reinvest could terminate the exemption, and vest the proceeds in the bankruptcy estate.
In Earl, because the debtor did not live in the Rental Property at the petition date, she could not later claim a homestead in the Rental Property even if she later moved into it and occupied it as her primary residence.
In summary, in the Ninth Circuit, the old adage that “you can’t un-ring the bell” applies to homestead exemption claims made by Chapter 7 debtors.
[1] Not for publication.

[1] Earl, citing In re Jacobson, 676 F.3d 1193, 1199 (9th Cir. 2012), which cites White v. Stump, 266 U.S. 310 (1924).  In Jacobson, the Ninth Circuit ruled that where state law had a reinvestment rule for homestead proceeds, that failure to timely reinvest could terminate the exemption, and vest the proceeds in the bankruptcy estate.