One of the biggest fears that debtors have is the fear of losing their homes. For far too long, creditors have threatened the forced sale of consumer’s homes as a way of paying back their debts. Homestead exemptions have given consumers the ability to protect the equity in their homes and save them from creditors.
What is a Homestead Exemption?
A homestead exemption is a regulation that provides homeowners ongoing property tax relief. Homes are only taxed on the amount of their value minus the exemption, but it only applies to the portion of your house in which the owner has equity.
Though homestead exemptions are typically designed to help gain relief from taxes, they hold unique benefits for bankruptcy filers.
Homestead Exemptions and Bankruptcy
As stated above, bankruptcy filers are able to further use homestead exemptions to their advantage for uses other than tax relief. These exemptions allow filers to claim specified amounts of equity in their homes as exempt from creditors and lenders, to keep them from foreclosing their homes.
The homestead exemption laws in California have been subject to a recent change. The previous law allowed for single homeowners to receive a $75,000 exemption, heads of households receive $100,000, and seniors and physically disabled individuals received a $175,000 exemption for their homes. This posed a problem because those amounts were too low for many consumers, leaving their homes vulnerable to creditors.
The new law, however, grants a better opportunity for homeowners to succeed in their efforts of saving their homes. Here are the new amounts:
- The minimum amount is now $300,000, where a county’s prior median sale price was $300,000 or less.
- If a county’s previous median sales price exceeded $600,000, the exemption is now $600,000.
- The last amount is now the county’s previous year’s median sales price if it fell between $300,000 and $600,000.
With these new amounts, it is now almost impossible for creditors to force the sale of one’s home when filing for bankruptcy. It provides room for bankruptcy filers to protect a greater amount of equity in their home for tax purposes but also allows for further protection of home equity from creditors.
Contact Our Los Angeles Bankruptcy Team Today
We understand that many people’s main concern when filing for bankruptcy is the risk of losing their homes. With new and improved legislature and experienced legal representation, we are able to help guide you through the bankruptcy process with ease and efficiency.
If you would like to learn more about how homestead exemptions can help you, contact us today through our website, or give us a call at (310) 846-8454 to schedule a consultation today!