Bankruptcy, particularly chapter 7, is not a typical option for California homeowners with modest equity in their home. This is because the homestead exemption (the amount of equity in your home that can be protected from creditors during bankruptcy) has not kept up with the average price of homes throughout California. Consequently, chapter 7 bankruptcy was never a viable option for most California homeowners because the process would result in losing their home through foreclosure.
However, as of January 1, 2021, Assembly Bill 1885 became law in the State of California, completely redoing the previous homestead exemptions and greatly expanding the viability and availability of chapter 7 bankruptcy for California homeowners. The new homestead exemptions, now in effect, are the greater of either of the following: (1) $300,000.00, or (2) the countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000). Calif. Code of Civil Procedure Section [“CCP”] 703.730. It is important to note that these exemptions apply to the amount of equity in your home, and not simply the fair market value. In other words, a $1 million dollar home with $700,000.00 remaining on the mortgage would be completely exempt in bankruptcy.
It is extremely important California homeowners with consumer debt be aware of these new homestead exemptions, because the relief available to them has never been as expansive as it is now. If you are considering bankruptcy, schedule a free consultation with one of our attorneys to discuss what options are best for you.
Copyright 2020
