One of the biggest reasons Chapter 7 bankruptcy is such a viable option for so many debtors is because of the opportunity to exempt (protect) assets and personal property from the Chapter 7 liquidation process. Unless the debtor owns extra homes, cars, or other high-value assets that are not exempt, obtaining a discharge of debt without losing property is quite common.
However, exemptions that worked well in previous decades may not have the same power today. California, for example, is known for exorbitant living expenses—namely, the cost of even the most modest homes. Currently, the only way someone in California can protect their home from Chapter 7 liquidation is if the equity did not exceed the current homestead exemption, which on average is just 15% of the median home’s value. The current law provides a 3-tier system that was discriminatory against unmarried individuals. If you were single without dependents your homestead exemption was limited to $75,000, $100,000 if married or head of household, and $175,000 if you were disabled or over the age of 65. The current median priced home in California is $533,500, thereby shedding light on the inadequacy of our current exmeption.
We are beyond excited, however, to announce that California legislators just passed SB832, which establishes a homestead exemption that reflects today’s staggering home values. Our very own Attorney Jenny L. Doling testified before the California Senate last weekend in support of the increase, which she has been fighting for since 2015. This work, for which she received a legislative advocacy award from Senator Wieckowski, is emblematic of our commitment at J. Doling Law, PC to making bankruptcy laws work in our clients’ favor.
SB832, passed along with AB1885, increases the California homestead exemption from $75,000 to at least $300,000. This exemption can be even higher in counties with higher median home values, as evidenced by local sales. The cap in the most expensive counties is now $600,000.
Because of this increase, many more families in financial distress will now be eligible for debt relief without the risk of losing their homes. Bankruptcy is a much more powerful option if families can discharge debt while keeping their homes safe from liquidation.
Once the Governor signs the bill—which we fully expect him to do—it will take effect immediately.
Retain Personalized Services from Our Firm
Are you considering bankruptcy? As a certified bankruptcy specialist, Attorney Doling can help you understand your options, anticipate the effects of bankruptcy on your present and future, and navigate the process with efficiency and ease. The new homestead exemption may allow you to obtain a substantial debt discharge without losing your home, and we want to help you take full advantage of this option. With our assistance, you will have the highest possible likelihood of achieving the fresh financial start you need.