Calfornia has passed a new law regarding homestead exemptions that go into effect on January 1, 2021. This new law provides benefits that were previously unavailable to debtors, and provide advantages that truly benefit consumers.
Below you will find more information on the new homestead exemption laws and how it can benefit you.
What Is a Homestead Exemption?
When you owe a debt to a creditor, they usually enact to sue you, get a judgment against you, and move to collect the judgment. This can take the form of garnishment from your paycheck or bank account, as well as attempting to seize or force the sale of your home and other assets to fulfill your debts.
The homestead exemption comes into play when a creditor moves to seize or sell your home. If the homestead exemption amount is larger than the amount of equity in your home, your home is completely protected from creditors.
The homestead exemption allows consumers to protect a specific dollar amount of their home’s equity from their creditor(s). The new law raises the protected amount, making it far more likely for homeowners to keep their homes during financial struggles.
Increased Homestead Exemptions for Homeowners
Currently, California’s homestead exemption amount is $75,000 if you are a single homeowner, $100,000 if you live with a family member, and $175,000 if you meet certain family, age, and income qualifications.
The new bill, AB1885, signed by Governor Newsom on September 15, 2020, increases the exemption for homeowners.
The new CA homestead exemption will be one of three amounts:
- The smallest amount will be $300,000 state-wide where the prior year’s median sale price for single-family homes was $300,000 or less.
- It will be $600,000 if your county’s median sale price was $600,00 or more.
- Lastly, it will be your county’s prior year median sale price where the median price is between $300,000 and $600,000.
The increase in exemptions is a long-overdue legislation that reflects the rising cost of the average home in California and provides added protection for their homes against creditors.
Benefits for Bankruptcy Filers
With the new homestead exemption amounts being raised substantially, there are huge benefits to those filing for bankruptcy.
Normally, creditors will assess the equity in one’s home to determine any value to resolve debts. Since many homeowners do not have equity in the homes that exceed the sales price in their counties, capping out at $600,000, the chances that their home will be sold during bankruptcy are slim to none.
With one of the biggest payouts for creditors now seemingly off the table, this new law is built only to benefit debtors instead of creditors, all without several extra hoops to jump through.
Contact Our California Bankruptcy Team Today
With new laws being passed, there are bound to be just as many questions as there are answers. With decades of experience, our firm provides the compassionate and personalized service you deserve to help get you back on your feet.
If you have any questions regarding whether the new homestead exemption law has the ability to positively impact your bankruptcy case, do not hesitate to contact The Turoci Bankruptcy Firm today through our website or give us a call at (310) 846-8454!