California Homestead Exemption – 2022 update
The California homestead exemption can help you save your home from creditors. Chapter 7 bankruptcy is liquidation; the bankruptcy trustee can take your stuff. They don’t take the shirt off your back, but at some point they draw the line regarding what you can keep. These are the bankruptcy exemptions, and each state has its own. The California exemptions include a way to protect home equity.
There are two sets of California bankruptcy exemptions. California bankruptcy attorneys call these the 703s and 704s. The California homestead exemption is found in the 704s, at California Code of Civil Procedure 704.730.
2022 update: the 2021 homestead exemption amount adjusts each year, and due to inflation, the 2022 California homestead exemption is now higher. CCP 704.730 (b) says: “The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.” In June 2021, the CPI was 297.447, a 4.4% increase from the June the previous year. Applying that factor to the homestead amounts, that would increase both ends of the spectrum to $313,200 and $626,400. As inflation in 2022 is higher yet again, it looks like the 2023 California homestead exemption will be even more than that.
The California Homestead Exemption 2022
In 2021, California homestead exemption increased dramatically. What this means to the person contemplating filing bankruptcy is that more of their home equity can be protected. They really do take houses in Chapter 7 bankruptcy. Previously (see below), the amount of home equity which could be protected was inadequate and hardly kept up with the inflated Calif real estate.
But then in 2020, COVID-19 struck, and people were suddenly unable to pay their rent and mortgages. Partially in response to the pandemic, the state legislature passed and the governor signed a dramatic increase to the California homestead exemption.
The result is a system which depends upon the location where the house is, and has nothing to do with marital status or age. And this makes sense, as a homeowner in Ventura County probably has a higher home value than someone who owns a home in Lancaster. So, now homeowners who’ve lived at a home for 4 years or more get a minimum of $300,000 of home equity protection, and a maximum of $600,000 of California homestead exemption.
Some guidance on the Los Angeles County median home price 2020
Spoiler alert on the above link: The trick is no one knows for sure what the data source for county median is. And if you haven’t lived at the property long enough, you don’t get the above protections. So you will want to consult with a qualified bankruptcy attorney before you risk your house.
The Three Homestead Exemptions in California Before 2021
Firstly, there’s the bankruptcy exemption that a single homeowner gets. This is in subsection (a)(1). In 2020, a single person who lives in a house gets to protect $75,000 of home equity under the California exemptions.
Secondly, there’s a higher exemption for a married person’s residence. This is in (a)(2). The California homestead exemption for a married person is $100,000.
Finally, if you can tick one of three boxes, you get the superduper $175,000 homestead exemption in California’s bankruptcy exemptions. To level-up and qualify for this, you have to either be:
- 65 years old;
- have a disability that prevents gainful employment; or,
- 55 years old, and make below a certain income level that changes from time to time
This may seem simple, but what is “disabled?” What is “as a result of?” What is the income level, and which time period is measured? You’ll want to speak to a qualified bankruptcy attorney in your area. But in the right circumstances, someone filing consumer bankruptcy can protect a lot more house equity under this third option.
Spouses Sometimes Count
A final note: a good thing about, in particular, the $175,000 California homestead exemption is that it extends to the spouse of the person filing Chapter 7. So if the debtor is, say, 63 years old, but their husband is 67 but really doesn’t want to file bankruptcy, the 63 year old who does file Chapter 7 bankruptcy gets the $175,000 homestead exemption in California anyway.
Be careful in Chapter 7 bankruptcy. It’s not always the best type of bankruptcies.
Learn the differences between Chapter 7 bankruptcy vs 11 vs 13.
You really should talk to a qualified Los Angeles bankruptcy lawyer, as you get what you pay for, and it’s not worth risking your home. If you don’t do this right, you’re literally gambling with your house.