Committee advances bill to let married homeowners each claim $175,000 homestead exemption; bankruptcy change removed for further review

The Senate Local Government and Taxation Committee on an unspecified date considered House Bill 282, which would allow married homeowners to each claim the $175,000 homestead exemption currently available to individuals and sent the bill to the fourteenth order of business for possible amendment.

Representative Lance Clow, District 25 of Twin Falls, told the committee the bill addresses the homestead exemption (which protects a homeowner's equity from involuntary liens) and not property taxation. "Homeowners are each entitled to $175,000 of protection of their equity in the event of an unexpected lien," Clow said, adding that the change would treat married owners the same as two unmarried co-owners.

Alexandra Cavall, who identified herself as a bankruptcy attorney and Representative from District 24, explained the bill's second section and why she and others had concerns about it. Cavall described a recent Ninth Circuit decision, McAllister v. Wells, that allows courts to consider post-petition events in bankruptcy cases and said that interacts badly with Idaho's one-year reinvestment requirement for proceeds from a forced sale under Idaho Code 55-1008. She told the committee conventional mortgage underwriting commonly requires a four-year waiting period after filing bankruptcy and government-backed loans generally require two years, creating a practical mismatch with the one-year reinvestment window.

Cavall said the first part of the bill would change Idaho Code 55-1002 so married homeowners could each claim the homestead exemption on an individual basis rather than share a single exemption. On the second part, she described competing views among attorneys about bankruptcy treatment and indicated there was reason to remove the bankruptcy language from this bill for further work. Representative Clow asked the committee to send the bill to the amending order and "eliminate section 2 that dealt with the bankruptcy question," language Cavall had addressed.

Senator Adams moved that the committee send House Bill 282 to the fourteenth order of business for possible amendment; Senator Berndt seconded. The motion carried; no nay votes were voiced. Senator Adams agreed to carry the bill on the Senate floor.

The committee did not adopt the proposed changes to Idaho Code 55-1008 during the hearing; presenters recommended removing the bill's section affecting bankruptcy treatment so the bill would proceed with the marriage-related change only. The committee did not take a floor vote on the bill itself during the meeting.

If enacted as presented to the committee's amending order, the bill would (1) modify Idaho Code 55-1002 so married homeowners may each claim the $175,000 homestead exemption, and (2) remove or postpone changes to Idaho Code 55-1008 related to the one-year reinvestment rule in bankruptcy cases, pending further clarification.