With a new year just over the horizon, a new law regarding homestead exemptions is coming with it. This new law has the ability to grant advantages that do not exist under the current law to give debtors more opportunities to succeed in the future.
The Old Law
The law (as of December 2020) regarding homestead exemptions allows single homeowners to receive a $75,000 exemption, heads of households receive $100,000, and seniors and physically disabled individuals receive a $175,000 exemption on their property.
One goal of these exemptions is to gain relief from the property taxes, but they have found more use when filing for bankruptcy. The exemptions allow bankruptcy filers to claim the above amounts of equity in their home as exempt from creditors.
The problem with these exemptions is simply that they are too low. When filing for bankruptcy, creditors will usually assess the equity in your home (under certain chapters) to determine any value that can help resolve debts. With housing costs in California only rising, the highest exemption cap ($175,000) does not cover a large number of homes, leading to foreclosures.
The New Exemption Law
The new homestead exemption law makes it much harder for a creditor to seize and sell your home to pay off your debts. Here are the new exemption amounts:
- The minimum amount will be $300,000, where the prior year’s median sale price was $300,000 or less.
- If your county’s median sales price exceeded $600,000, the exemption will be $600,000.
- It will be your county’s previous year’s median sales price if it was between $300,000 and $600,000.
How the New Homestead Exemption Can Help You
There are two main benefits to the new homestead exemption laws. The first of these benefits safeguards your home’s equity from creditors. It provides protection if there is ever a judgment against you and a creditor tries to have your home sold to pay the judgment.
The biggest beneficiaries, however, of this new law are bankruptcy filers. One of the biggest fears that bankruptcy filers tend to have is whether or not their home will be taken from them.
With the exemption amounts being raised significantly in the new year, it will be far more difficult for creditors to seize and sell your home in the event of a bankruptcy.
Contact Our Los Angeles Bankruptcy Team Today
With the new homestead exemptions coming into play in the new year, filing for bankruptcy without the risk of losing your home is more than possible. We understand the intricacies of bankruptcy law and are prepared to fight the creditors that are attempting to take what’s yours.
If you have questions about how these new laws can benefit you personally, do not hesitate to contact us today through our website, or give us a call at (310) 846-8454!