A common mis-conception that we hear from potential clients consulting our firm for the first time is that their home would be sold if they file bankruptcy. This is not the case if the available equity in a debtor’s home is exempt from liquidation.
Congress allows each state to determine what the residents of the state may keep when filing bankruptcy (exemptions from liquidation) if a state “opts out” of the federal exemption system. California created not one, but two, sets of exemptions, which have long been reputed to be the most generous in the country.
However, the benefits to debtors of California’s once-generous homestead exemption have steadily eroded, as property values in this state climbed. Even rare periodic adjustments failed to keep up with California’s soaring property values.
Until now.
On September 15, 2020, Governor Gavin Newsom signed into law Assembly Bill 1885 which dramatically increases the homestead exemption for personal residences in California. The new law is effective for cases filed on or after January 1, 2020.
The new homestead exemption is increased significantly to $300,000. — but may increase up to $600,000. based on the median sale price of single-family homes within the county where the debtor resides.
For those residents of Orange County, and Los Angeles County, this means that the exemption will increase by up to eight times in some cases.
The increased homestead exemption will also be annually indexed to keep pace with future inflation.
This is all very good news for beleaguered California homeowners who are facing increased financial pressure due to the pandemic and social unrest all but shutting down the California economy.
At the Law Offices of Kaufman & Kaufman, we are proud that an attorney — not a paralegal — will review our clients’ financial situations, to determine and advise the best course of action, including both bankruptcy and non-bankruptcy alternatives.
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