THE SENATE

S.B. NO.

566

THIRTY-FIRST LEGISLATURE, 2021

S.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO HOMESTEAD EXEMPTIONS.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


SECTION 1. The legislature finds that the coronavirus disease 2019 (COVID-19) pandemic and governmental responses to contain the spread of COVID-19 have precipitated an economic contraction on a global, national, and local scale. In Hawaii, this economic contraction ballooned the State's unemployed population from its 2019 level of 2.8 per cent to its peak level of 23.8 per cent in May 2020. Additionally, nearly half of the households in the State have seen a decline in income due to the COVID-19 pandemic.

The legislature further finds that this economic contraction has exacerbated the economic strain felt by Hawaii families due to the high cost of living. The percentage of persons who are not current on their mortgage loans more than doubled from 2019 to 2020. This will likely lead to a surge of foreclosures in the State.

To keep families in their homes, the legislature believes it is necessary to raise the afforded homestead exemption in bankruptcy proceedings. The amount of the homestead exemption in the State has not been adjusted since 1978; however, $1 in 1978 has the same buying power of more than $4 in 2020.

The purpose of this Act is to increase the homestead exemption for all persons to $350,000 and specify that the real property be the principal residence.

SECTION 2. Section 651-92, Hawaii Revised Statutes, is amended to read as follows:

"651-92 Real property exempt. (a) Real property shall be exempt from attachment or execution [as follows:

(1) An interest in one parcel of real property in the State of Hawaii, of a fair market value not exceeding $30,000, owned by the defendant who is either the head of a family or an individual sixty-five years of age or older.

(2) An] for an interest in one parcel of real property in the State of Hawaii, of a fair market value not exceeding [$20,000,] $350,000, owned by the defendant who is a person[.] and is the person's principal residence.

(b) The fair market value of the interest exempted in [paragraph (1) or (2)] this section shall be determined by appraisal and shall be an interest which is over and above all liens and encumbrances on the real property recorded prior to the lien under which attachment or execution is to be made. [Not] No more than one exemption shall be claimed on any one parcel of real property even though more than one person residing on such real property may otherwise be entitled to an exemption.

(c) Any claim of exemption under this section made before [May 27, 1976,] the effective date of this Act shall be deemed to be amended on [May 27, 1976,] the effective date of this Act by increasing the exemption to the amount permitted by this section on [May 27, 1976,] the effective date of this Act to the extent that such increase does not impair or defeat the right of any creditor who has executed upon the real property prior to [May 27, 1976.] the effective date of this Act.

[(b)] (d) No exemption authorized under this section shall apply to process arising from:

(1) A lien as provided by section 507-42;

(2) A lien or security interest created by a mortgage, security agreement, or other security instrument;

(3) A tax lien in the name of the federal or state government;

(4) An improvement district lien of any county of the State; or

(5) A lien or encumbrance recorded against the real property prior to the acquisition of interest in and commencement of residence on such real property."

SECTION 3. Section 651-96, Hawaii Revised Statutes, is amended to read as follows:

"651-96 After sale, money equal to real property exemption protected. The money paid to the defendant as the defendant's exemption shall be entitled, for the period of six months thereafter, to the same protection against attachment and execution which section 651-92 gives to the real property. If the defendant, within [such] the six-month period, applies [such] the proceeds to the purchase of real property, the date of [such] the acquisition and commencement of residence for the purpose of [section 651-92(b)(5),] section 651-92(d)(5) shall be considered to be the date of the acquisition of interest in and commencement of residence on the real property whose sale resulted in [such] the proceeds."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.


 


 

Report Title:

Bankruptcy; Homestead Exemption

 

Description:

Increases the homestead exemption for all persons to $350,000 and requires that the real property be the principal residence. (SD1)

 

 

 

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