You will find a version of the homestead exemption in almost every state across the country. The homestead exemption is the amount of home equity you can protect from the Chapter 7 liquidation process, in which the trustee sells your nonexempt assets to repay your creditors during bankruptcy. The value of the homestead exemption varies from state to state, and it typically increases over time to match the cost of living.
In California, a state that is infamous for exorbitant real estate prices, the homestead exemption is currently $75,000 (or $100,000 if you are the head of your household, or $175,000 if you have a disability or are 65 or older). Even the highest possible exemption is less than a third of the state’s median home value (which is currently at record highs).
In what is perhaps the best news of 2020, Governor Newsom increased California’s homestead exemption to whichever amount is greater: $300,000 or the county’s median sales price (up to $600,000). San Diego, San Francisco, Orange, and Los Angeles are among the counties where the exemption will max out at $600,000.
Signed on September 18th, the increase will become effective on January 1, 2021. Therefore, if you file Chapter 7 bankruptcy in San Diego County in 2021, you can likely protect your home from the liquidation process so long as you own less than $600,000 of equity.
This is particularly good news because liquidation is one of the biggest reasons why people delay or avoid bankruptcy. Due to this exemption increase, more individuals will be able to obtain relief without losing what matters most.
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Are you considering bankruptcy? Let San Diego Legal Pros handle your case. We have more than 15 years of experience helping clients navigate the bankruptcy process. Due to harmful myths and stereotypes, many people try to avoid bankruptcy for as long as possible, but we strongly discourage this. The most successful bankruptcies are typically filed by those who sought counsel sooner rather than later. When you schedule your complimentary consultation with our firm, we can help you determine whether bankruptcy is the solution you need. If so, we can get started immediately—otherwise, we can help you find a suitable alternative.