by In a major win for consumer debtors and the attorneys who represent them, the Ninth Circuit Court of Appeals has reversed the District Court’s ruling in Warfield v. Nance, reaffirming that debtors may amend their bankruptcy exemptions even after earlier claims have been denied. The decision safeguards the principle that exemptions must be liberally construed in favor of debtors and upholds the right to a genuine “fresh start.”
Background
Johnie Lee Nance filed for Chapter 7 bankruptcy in Arizona after suffering a debilitating stroke that left him unable to work. Initially, he claimed his homestead under Arizona law. When the trustee objected—pointing out that Nance had not lived in Arizona for the full two-year domiciliary period required under 11 U.S.C. § 522(b)(3)(A)—Nance amended his exemptions to claim Washington law instead. Unfortunately, Washington’s homestead protection applies only to property physically located within that state, and the bankruptcy court sustained the trustee’s objection.
Determined to preserve his basic shelter, Nance filed a second amendment electing the federal exemption scheme under § 522(d), including the federal homestead exemption for his Arizona property and the wildcard exemption for his recreational vehicle. The bankruptcy court upheld the amendment under Rule 1009(a), which allows debtors to amend exemptions “as a matter of course at any time before the case is closed.”
The District Court for the District of Arizona reversed, holding that Nance was barred by claim preclusion from changing exemption schemes and that the bankruptcy court lacked authority to apply the wildcard exemption sua sponte. Nance appealed to the Ninth Circuit.
Nance was represented by April Maxwell of Maxwell Law Group, with Krystal Ahart of Kahn & Ahart PLLC as co-counsel.
The Arguments
Appellant’s Argument
On appeal, Mr. Nance contended that the District Court’s application of claim preclusion was fundamentally inconsistent with the Bankruptcy Code and Rules. His counsel argued that Rule 1009(a) expressly authorizes debtors to amend schedules freely before case closure and that bankruptcy courts routinely permit such amendments to correct or replace defective exemption claims. They emphasized that each of Nance’s amendments reflected a distinct legal basis—Arizona law, Washington law, and finally federal law—and thus did not involve the “same claim” for purposes of preclusion.
Counsel further argued that public policy favors allowing debtors to amend exemptions so that honest but unfortunate debtors can retain the modest property necessary for a fresh start.
Appellee’s Argument
The Chapter 7 trustee, Lawrence Warfield, argued that once the bankruptcy court sustained his objections to Nance’s first two exemption claims, any subsequent effort to exempt the same property under a different legal theory was barred by res judicata. The trustee warned that permitting serial amendments would create “a never-ending change in exemptions” and undermine the finality of prior orders. He also argued that the bankruptcy court exceeded its authority by granting a federal wildcard exemption that Nance had not specifically listed under § 522(d)(5).
The Ninth Circuit’s Ruling
Writing for the panel, District Judge Joan Lefkow (sitting by designation) rejected the District Court’s reasoning and adopted the Eighth Circuit’s view in In re Ladd. The panel held that claim preclusion “does not bar a debtor from amending the schedule of exemptions to seek a federal exemption after the bankruptcy court ruled that previously claimed state exemptions were unavailable.” Because Nance’s federal exemption could not have been raised or adjudicated simultaneously with the earlier state-law claims, there was no “identity of claims” and therefore no claim preclusion.
The panel also upheld the bankruptcy court’s discretion in granting the wildcard exemption for Nance’s recreational vehicle, even though it had been listed under § 522(d)(1) rather than (d)(5). The court emphasized that technical mislabeling should not defeat an otherwise valid exemption, reaffirming that bankruptcy law must be applied flexibly to achieve its remedial purpose.
The Amicus Perspective
The Ninth Circuit’s decision closely echoed the arguments presented in an amicus brief submitted jointly by the National Consumer Bankruptcy Rights Center (NCBRC) and the National Association of Consumer Bankruptcy Attorneys (NACBA). The brief—authored by the Hon. Meredith A. Jury (Ret.)—urged reversal, explaining that applying claim preclusion to exemption amendments misconstrues the unique procedural posture of bankruptcy. Unlike traditional civil litigation, exemption claims are iterative and often corrected as both debtor and trustee refine the correct legal basis.
Amici warned that adopting a rigid “one-strike-and-you’re-out” rule would trap debtors in technical errors, stripping them of their right to protect essential property and undermining the Bankruptcy Code’s purpose of providing a meaningful fresh start. The Ninth Circuit agreed, emphasizing that exemptions must be “liberally construed in favor of debtors” and that honest debtors should not be penalized for procedural missteps.
Significance
The Nance decision restores a critical procedural protection for debtors and offers clear guidance to bankruptcy courts and practitioners throughout the Ninth Circuit:
- Debtors may freely amend exemptions under Rule 1009(a) before case closure, even after prior denials.
- Claim preclusion does not apply when successive exemption claims rely on different statutory schemes.
- Bankruptcy courts retain discretion to recognize valid exemptions despite technical citation or formatting errors.
By reversing the District Court and reinstating the bankruptcy court’s order, the Ninth Circuit reaffirmed the flexible and humanitarian purpose of the Bankruptcy Code. The ruling stands as a reminder that the bankruptcy system exists to protect—not punish—the honest but unfortunate debtor.
Opinion and Briefs
Warfield v Nance – 9th Circuit Opinion