In September 2020, the State of California passed AB 1885. The new law will finally update California’s bankruptcy homestead exemptions. The new law will set homestead exemptions between $300,000 to $600,000. AB 1885 would increase that to the greater of $300,000 or the countywide median sale price of a single-family home in the calendar year prior to the year when the judgment debtor claims the exemption. It caps the amount at $600,000 and, beginning in January 2022, adjusts it annually for inflation based on the change in the California Consumer Price Index.
The current homestead exemptions range from $75,000 to $175,000 determined by factors like marital status, age, disability and other factors. The current home prices in California make the current system nearly useless as nearly all homes have equity greater than the current homestead amounts.
In bankruptcy terms, the change is monumental and is a dramatic rewriting of the bankruptcy laws. More people will now be able to file Chapter 7 Bankruptcy than ever before and keep their homes. For homeowners who file Chapter 13 bankruptcy, it is possible that the new law may result in a significantly lower Chapter 13 plan payment amount.
If you have been considering filing bankruptcy but have been reluctant to do so because you own a home, now may be the perfect time to consider doing so. Call us today to schedule a consultation with a bankruptcy attorney.