California Increases Homestead Exemption in New Legislation
Assembly Bill 1885 (AB 1885) was signed into law by California Governor Gavin Newsom on September 15, 2020, and becomes effective January 1, 2021. The new law provides incredible relief for homeowners with equity in their property, but have trouble paying their monthly bills. The law increases a homeowner’s homestead exemption on their personal residences from $75,000 to up to $600,000. These exemptions are extremely important to consider when filing Chapter 7 bankruptcy or Chapter 13 bankruptcy, as they protect between $300,000 to $600,000 of equity in a person’s property.
What Is the Homestead Exemption?
A homestead exemption protects a certain portion of the equity in a person’s home when filing bankruptcy. In California, a Chapter 7 Trustee will sell any property that cannot be exempt in a Chapter 7 filing. The sale proceeds are used to pay credit card balances, personal loans, and other unsecured debts. The Chapter 13 trustee will not sell nonexempt property under a Chapter 13 filing; instead, the property is protected, but the person must pay the amount of nonexempt equity to their creditors over 3 to 5 years.
The AB 1885 California homestead exemption is available to all California homeowners in financial distress. It will help individuals with equity in their homes who need to eliminate consumer debt in Chapter 7 bankruptcy. Also, more people can file Chapter 13 bankruptcy and reorganize debt at a much smaller percentage than what they owe to creditors.
What Does the New Homestead Tax Exemption Do?
The law increases exemptions to provide more substantial relief to homeowner’s than has been available over the past 20 years.
It increases the homestead exception from, $75,000 for an individual, and $100,000 for a family; to $300,000 to $600,000 for both. The new homestead amount is equal to the prior year median home sale price, which is over $600,000 in LA County. Therefore, most individuals can protect up to $600,000 of equity and file bankruptcy without fear of losing their homes.
Contact Kevin Simon Law
We understand how financial stress can impact all areas of your life. If filing for bankruptcy is the right option, the bankruptcy attorneys at The Law Offices of Kevin T. Simon, APC provide the legal advice and representation needed to regain control of your finances and protect your home in the San Fernando Valley, Los Angeles and surrounding areas. Our Woodland Hills attorneys are also familiar with the California homestead exemption increase and the protections now available to you. Call 818-783-1674 to learn more and receive a free consultation.