When you file for bankruptcy in California, you are allowed to keep certain property called exempt property. If you happen to own a home with some equity in it (not so common in California these days), you may be able to protect your home with what’s called the “homestead exemption.” On January 1, 2013, the homestead rules changed in some really great ways for California residence who are considering bankruptcy.
Under the new 2013 California exemption laws for bankruptcy, you can protect up to $175,000.00 of equity in your house if you are over the age of 55 and made less than $25,000 if you’re single or less than $35,000 together if you’re married. (There are some other changes as well, but the income issue is all I’m tackling today.) This is a big change from before 2013 when you could only use the max homestead amount if you made no more than $15,000 if you were single or $20,000 together if you were married. This means many low income California residents with equity in their homes may qualify for the largest exemption amount fully ten years earlier now than in the past. That’s a great thing for California homeowners who need to file for bankruptcy.
The homestead exemption is available in both chapter 7 and chapter 13 case. If you love reading legal language, you can read about homesteads straight from the source: When you file a bankruptcy case, it doesn’t matter if you’ve recorded a claim of exemption with the county or not. You get an “automatic homestead” in the bankruptcy as long as you claim it properly in your bankruptcy papers.
You want to be very careful, however, because bankruptcy law and homestead law are both pretty complicated. If you do things the wrong way, you run the risk of losing your home. If you’re looking to protect your house in bankruptcy, you should definitely talk to an experienced bankruptcy attorney before you file.
Image credit : By Pearson Scott Foresman [Public domain], via Wikimedia Commons