# Gaughan v. Smith (In Re Smith)

> United States Bankruptcy Appellate Panel for the Ninth Circuit · April 7, 2006 · 342 B.R. 801

URL: https://www.frixlaw.com/law-library/cases/9650870

## Case

- **Full name:** In Re Fredrick Edward SMITH and Cheryl Lynn Smith, Debtors. Maureen Gaughan, Chapter 7 Trustee, Appellant, v. Fredrick Edward Smith; Cheryl Lynn Smith, Appellees
- **Court:** United States Bankruptcy Appellate Panel for the Ninth Circuit
- **Decided:** April 7, 2006
- **Citations:** 342 B.R. 801; 6 Cal. Daily Op. Serv. 3347; 2006 Bankr. LEXIS 639
- **Precedential status:** Published
- **Opinion:** Concurrence by Klein
- **Judges:** Smith, Klein, Montali
- **Cited by:** 26 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9650870

## How later opinions describe it (automated extraction)

- holding that the chapter 7 debtor lost his exemption in proceeds from the sale of his house under Arizona’s homestead statute when he failed to reinvest them within the statutory period
- noting “general rule that exemption rights are determined as of the petition date”

## Opinion text

KLEIN, Bankruptcy Judge,
concurring.
I join the majority decision with some reluctance because there is considerable common sense in the bankruptcy judge’s ruling and join only because I am unable to distinguish the California exemption that was addressed in England v. Golden (In re Golden), 789 F.2d 698 (9th Cir. 1986), from the similar Arizona exemption involved in this appeal. Although there is merit to the view that Golden is binding law of the circuit only with respect to California exemptions because (even in the case of identically-worded exemptions) the respective state supreme courts might construe them differently, a decent respect for precedent and predictability counsels in favor of applying Golden.
The issue is difficult, and Golden may not have been correctly decided in 1986. The basic reason for pause is that if funds that are conditionally exempt following the sale of a homestead are spent during the period of conditional exemption for some non-homestead purpose, there is no reason to think that a judgment creditor could force the expenditure to be undone. Moreover, if the conditionally-exempt funds are in the debtor’s bank account during the bankruptcy, the rule of Golden creates an incentive for the trustee and creditors to force the case to remain open until after the relevant time expires. In such circumstances, the debtor could be in the difficult and disadvantageous position of needing to purchase a homestead property during the bankruptcy, notwithstanding the general reluctance of mortgage lenders to deal with consumers until after a bankruptcy is finished.
I must confess, however, that the perverse incentive that I perceive in Golden has not frequently manifested itself in bankruptcy cases in the ensuing decades. Either trustees are not unduly prolonging cases for that reason or they are permitting conditionally-exempt funds to be abandoned as being of inconsequential value and benefit to the estate. In other words, the opportunity for abuse following upon Golden has remained more theoretical than real.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9650870. Public record. Not legal advice.