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HB 36 EXEMPTIONS FOR LEGAL ACTION AGAINST PROPERTY

Current Location: SJC
Referrals: HJC/HTRC/SJC

HPREF [1] HJC/HTRC-HJC [2] DNP-CS/DP-HTRC [6] DNP-CS/DP [8] fl/a- PASSED/H (67-0) [11] SJC-SJC

HB 36 PDF  |  HB 36 FIR


Scheduled on - Date:  Time:   Location:

3/02/2021 [11]SINT - Sent to location Senate Judiciary (SJC)
2/26/2021 [8]HCAL - Floor amended House Calendar (HCAL)
2/26/2021 [8]HCAL - Passed the House of Representatives Senate Introduction (SINT)
1/19/2021 [1]HPREF - Sent to location House Judiciary (HJC)
1/05/2021 [99] - Sent to location House Prefiled Legislation (HPREF)
Synopsis:

 House Bill 36 (HB 36) increases allowable exemptions in bankruptcy, insolvency, and other proceedings with judgement creditors.

Analysis:

 House Bill 36 (HB 36) increases allowable exemptions and exemption amounts on personal property for those entering bankruptcy, insolvency, and other proceedings involving judgement creditors. 

HB 36 exempts the following from bankruptcy, other proceedings, fines, attachment, or foreclosure by creditors:

1. Household goods and furnishings are exempt
2. Vehicle up to $10,000
3. Jewelry up to $5,000
4. Personal property up to $15,000
5. Tools, and etc. used in a business up to $15,000
6. Right to receive benefits: social security, veteran’s, disability, unemployment, illness, workers’ compensation, and government assistance i.e., Medicaid, and food stamps
7. Alimony, domestic support or separate maintenance, payments from stock bonus, pension, profit-sharing, annuity necessary for support is exempted
8. Exempted from proceedings are retirements not subject to taxation as are refundable tax credits.
9. Musical instruments up to $4,000 and art up to $2,500 unless by or of the person or a relative.
10. The value of electronic entertainment equipment over $1,500 is not exempted as a household good.
11. Benevolent association benefits up to $50,000 are not taken by any process to pay debts of the deceased family member. 

HB 36 more than doubles the homestead exemption to between $150,000 and $300,000 depending on marital status. The maximum exemption is $350,000 for those 65 years or older; 55 years or older if gross income is less than $25,000 or $50,000 for married owners; or disabled and unable to work. If a resident does not own a home, the exempt real or personal property is $15,000 instead.

This legislation eliminates an existing statute that specifies reduced exemptions for persons who support only themselves.

Cost-of-living adjustments is a new provision introduced in HB 36. Beginning in 2023, the exemption amounts will adjust according to the Consumer Price Index in $25 increments.

HB 36 apply to filings beginning July 1, 2021.

Amendments:

Amendment: February 26, 2021 by Hfl:

Hfla/HTRCcs/HJCcs/HB 36: The House Floor amendment of HTRCcs/HJCcs House Bill 36 makes the following changes:
•	Adds clarifying language regarding Financial Institution Writs. The representative executing the writ may be relied on to determine if the $2,400 exemption is satisfied with other accounts in other financial institutions. The account holder may claim additional money is exempt if applicable under other laws. 
•	Limits household goods and furnishings to $75,000 instead of exempting all from receivership
•	Clarifies that works of art of or by a person or immediate relative is exempt while all other artwork is exempt up to $2,500
•	Adds recreational vehicle as a primary residence
•	A person has a minimum of 30 days to claim of exemption of property or garnishment. If filed after the deadline, a judge will determine if the exemption was waived.

Current Law:Current exemptions in legal proceedings with creditors: Personal property $500 Tools $1500 Vehicle $4000 Jewelry $2500 Benevolent fees $5,000 Extra exemption $5,000 Home exemption $60,000 Currently New Mexico residents may chose exemptions under federal law or state law. The federal exemptions are similar to current state ones.

Bill Comments:
Position: Support - with Amendments   Priority: High
ICBA/NM supports the House Taxation & Revenue committee substitute for House Judiciary committee substitute for HB036.  I would like to thank Rep. Ely for his willingness to work with us in forging a compromise.  We also would like to thank the advocates for this bill for working with us in good faith. 
 This is a true compromise that will serve both consumers and lenders well as we go forward.  
_______________________________________________________________________________________________________________________
ICBA/NM opposes the committee substitute for HB 36 due to the dramatic increase in the amount of the homestead exemption.  While there are substantial increases in the exemption amounts of personal property in the bill, our industry's concerns are with the homestead exemption.

The current homestead exemption amounts were set in 2007 and represented a compromise with that year's bill sponsor and our industry.  We have struck a similar compromise with this bill increasing the homestead exemption amounts by fifty-percent - from $60,000 to $90,000 (individual ownership) or $120,000 to $180,000 (joint ownership).  We have agreed also to increase the homestead to $120,000 (individual) and $240,000 (Joint) for those 65 and over, or age 55 who are physically or mentally disabled, or have an income of $25,000 or less (individual) or $50,000 (joint).

We feel these levels protect the ability of homeowners to utilize their equity in a homestead for additional borrowing purposes.  

We have explained to the sponsor (Rep. Ely), Speaker Egolf, and Rep. Nibert that banks would reduce an individual's stated net worth by the amount of exemptions granted under state law when underwriting loan applications utilizing home equity.  

The New Mexico Association of Realtors reports that the 2020 median selling price for homes in our state was $240,000.  One can readily see that the proposed increase in the homestead exemption ($150,000 for an individual owner or $300,000 for a jointly owned domicile) would leave many New Mexicans with little to no equity that could be utilized for loans necessary for family needs or to finance creation, continuation, or expansion of a small business - especially if the homeowner still owed for a mortgage on the property.  The bill does not have an impact on secured credit (mortgages).