As of January 1, 2021, a new law has gone into effect in California regarding homestead exemptions with the ability to greatly benefit debtors. It provides a distinct advantage to bankruptcy filers, making it nearly impossible to lose your home during the bankruptcy process.
What Are Homestead Exemptions?
When you owe a debt to a creditor, they will usually choose to sue in order to collect a judgment from you. This judgment can come in the form of a specific dollar amount, wage garnishment, or even the forced sale of your home.
Homestead exemptions allow consumers to protect a certain dollar amount of their home’s equity from creditors in the event of a foreclosure.
Old vs. New
Here are exemption amounts found under the previous law:
- $75,000 for single homeowners
- $100,000 if you live with a family member
- $175,000 if you meet certain family, age, and income requirements
The new law, however, contains much larger amounts that truly benefit the debtors the law is meant to serve. The smallest exemptions amount that can be given is $300,000 state-wide where the median single-home sale price was $300,000 or less. If the median sale price for the county is $600,000 or more, the amount is $600,000. The last amount is the county’s median sale price where the median sale price falls between $300,000 and $600,000.
How You Can Take Advantage
One of the biggest payouts for creditors is the successful foreclosure of a home. Although this helps creditors, it comes at the extreme detriment of debtors who should never have their homes taken from them.
The new homestead exemption law now makes filing for bankruptcy without the chance of losing your home possible. Since most homeowners do not hold equity in their home over the maximum amount ($600,000), the chances that their homes will be sold during bankruptcy are now slim to none.
It is evident that this new law is finally meant to benefit debtors and bankruptcy filers instead of creditors, and taking advantage of these new exemptions may be in the best interest of individuals with large amounts of debt.
Contact Our Los Angeles Bankruptcy Team Today
We understand how important your home is to you. If you are enduring a stressful financial situation, we are committed to making sure you find freedom from your debts in the easiest and most cost-effective way possible.
If you are constantly overwhelmed by debts, do not hesitate to contact us today through our website or give us a call at (818) 805-1758 to see how we can help!