California Governor Gavin Newsom signed Assembly Bill 1885 (AB-1885) into law on September 15, 2020. AB-1885 will increase the creditor homestead exemption for personal residences in the state of California.
Under AB1885, the new homestead exemption will start at $300,000 but can be as high as $600,000 based on the median sale price of homes within a particular county during a particular year. These new homestead amounts will also be indexed against inflation in the future and will automatically increase in the without the Assembly having to revisit them so frequently.
The changes to AB-1885 go into effect January 1, 2021, and will replace the state’s old homestead exemptions, which had a confusing range of $50,000 for a single debtor to up to $175,000 for a married elderly couple.
Factoring in the high property values in California, the old homestead exemptions meant that many Californians were displaced from their homes because of indebtedness, leading to increased homelessness and additional burdens for the state. The new changes to AB-1885 will make it substantially easier for homeowners to retain their homes while filing for bankruptcy.
AB-1885 does not change any of the statutory exceptions to homestead, such as consensual security interests and state taxes. However, it will help people who want to file for Chapter 13 bankruptcy and are worried about losing their homes to foreclosure. The new provision in AB-1885 should help debtors filing for this bankruptcy option reorganize without too many issues.
Do you have more questions about AB-1885 and filing for bankruptcy? If so, please don’t hesitate to call our law firm at (310) 846-8454 or contact us online to request a consultation. We are here to walk you through all of your options.