¹C.C.P. § 704.720(b) provides in relevant part:

(b)If a homestead is sold under this division or is damaged or destroyed or is acquired for public use, the proceeds of sale or of insurance. . . are exempt in the amount of the homestead exemption provided in Section 704.730.

The debtor is not entitled to the automatic homestead upon a voluntary sale of the property, In re Cole, 93 B.R. 707 (Bankr. 9th Cir. 1988), or upon a sale pursuant to a deed of trust. C.C.P. § 703.010(b); Spencer v. Lowery, 235 Cal. App. 3d 1636 (1991). Historically, the automatic homestead had been construed to apply only to execution sales of homestead property to enforce a money judgment and not to all involuntary sales. In re Pladson, 154 B.R. 305, 306-07 (N.D. Cal. 1993)(construing C.C.P. § 704.720(b)); Spencer v. Lowery, 235 Cal. App. 3d 1636. However, the legislature enacted an emergency amendment to C.C.P. § 703.140 in reaction to Pladson which makes it clear that the automatic homestead, as well as the declared homestead, applies in bankruptcy cases. C.C.P. § 703.140(a), as amended, provides in relevant part:

(a)In a case under Title 11 of the United States Code, all of the exemptions provided by this chapter including the homestead exemption. . . are applicable regardless of whether there is a money judgment against the debtor or whether a money judgment is being enforced by execution sale or any other procedure.

The legislative note reveals that the amendment does not change, but is declaratory of existing law.

²C.C.P. § 740.920 provides in relevant part:

A dwelling in which an owner or spouse of an owner resides may be selected as a declared homestead pursuant to this article by recording a homestead declaration in the office of the county recorder of the county where the dwelling is located.

³C.C.P. § 704.960(a) provides:

(a)If a declared homestead is voluntarily sold, the proceeds of sale are exempt in the amount provided by Section 704.730 for a period of six months after the date of sale.

⁴See fn. 1.

⁵C.C.P. § 704.950 provides in relevant part:

(a)[A] judgment lien on real property. . . does not attach to a declared homestead if. . .

(1)A homestead declaration describing the declared homestead was recorded prior to the time the abstract or certified copy of the judgment was recorded to create the judgment lien.

(2)The homestead declaration names the judgment debtor or the spouse of the judgment debtor as a declared homestead owner.

* * *

(c)A judgment lien attaches to a declared homestead in the amount of any surplus over the total of the following:

(1)All liens and encumbrances on the declared homestead at the time the abstract of judgment or certified copy of the judgment is recorded to create the judgment lien.

(2)The homestead exemption set forth in Section 704.730.

⁶The practice of title companies in California is to require that all recorded interests, whether or not enforceable, be paid from the proceeds of a transaction prior to the closing of escrow on a sale or a refinance. The Ninth Circuit Bankruptcy Appellate Panel has stated that courts should apply a practical approach to determining the impact that a judicial lien may have on the debtor's ability to use a given piece of exempt property to achieve his or her fresh start. In re Herman, 120 B.R. 127, 131 (Bankr. 9th Cir. 1990). The Court further noted that where the creditor's lien has no present economic value, the lien is essentially a cloud on the debtor's title and right to future enjoyment of the property, and the lien impairs the exemption. Id.

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