Huge Increase in Homestead Exemption in California
Starting on January 1, 2021, we will be seeing further increases on the Homestead exemption. The latest bill will protect a series of homeowners across the state of California and ensure that most homes will be protected from creditors in the event of a bankruptcy. Under the latest revision to the law, California homesteads greater than $300,000 will be offered exemption where as a single-family home cannot exceed an exemption of $600,000. Based off of the county in California where you live, new projections for homestead exemptions have risen across the board. Homeowners in areas like Orange County can expect up to $600,000 for exemptions or $765,000 median price. Los Angeles County rises to 600,000 as well with a $664,000 median. San Bernardino County will rise to $370,000 and Riverside counties expected to rise to $400,500. San Francisco County required these improvements most of all with a $600,000 exemption awarded based off of a $1.4 million median.
Homestead Exemption Defined
Under the California Constitution, the legislation for Homestead exemptions will protect equity by law and prevent the chance for the sale of a certain portion of a Homestead from the head of a family. It essentially means that if a piece of property needs to be sold to satisfy the conditions of a bankruptcy, a family will still be able to access the equity that they’ve got in their homes so that they could purchase a second home or rent comfortably. It preserves the home of the family and presents the housing situation for people experiencing bankruptcy.
The Homestead exemption in California will protect proportion of the homeowners home equity even if the homeowner was to file for a business bankruptcy or consumer bankruptcy. This means that even if a property is sold, the debtor will be able to give access to at least $600,000 in equity that they own in their home.
Selling a home is not usually advantageous for a creditor and it’s often only chosen when the homeowner has full equity in their house and devalued substantially above the new limits. As many homeowners do not hold equity in their house that goes beyond $600,000, the increase in this limit works to protect many homes in California from being sold under a Chapter 7 bankruptcy.
The current laws only provide up to $100,000 for married couples and $75,000 for single adults. This means that across the state of California a number of homes were seen as beneficial for sale during a Chapter 7 bankruptcy proceeding. Depending on the type of bankruptcy that was being filed and the condition of a person at the time of filing, creditor attorneys were often choosing the benefits that would satisfy the majority of debt rather than looking towards preserving a home.
The changes to the law represent a massive change in the status of bankruptcy law across California. Trustees and creditors are likely to be looking towards other creative ways that they can satisfy the conditions of a bankruptcy while leaving primary real estate intact.
Under these new amendments it could be more advantageous than ever to consider the option for bankruptcy across the state of California. If you have been holding out on bankruptcy because you are worried about keeping access to the equity in your home, wait until January. By waiting until January you can keep access to more equity in your home and end with a much more favourable bankruptcy process.
If you could use assistance with the process of navigating a bankruptcy in the state of California contact our staff today. We are a team of bankruptcy attorneys that can help you though your bankruptcy application and advocate for you throughout your process.
This article was written by Alla Tenina. Alla is one of the best tax attorneys in Orange County Ca, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.