Protecting Your Home-California Bankruptcy Homestead Exemptions

Many people who are considering filing for bankruptcy have concerns about how the bankruptcy will affect the equity in your house. How the bankruptcy affects your house depends on which Chapter you filed under.

If you file for Chapter 13 bankruptcy, which is a debt repayment plan, you will be able to keep your house so long as it is your principal place of residence. If you own a second house, you may be allowed to keep the house-if the second house is generating income for you and it not a drag on your finances. A second house is considered a drag on your estate if the mortgage and expenses for the second house is more than the money you receive for renting out the second house.

If you file for Chapter 7 bankruptcy, which is a liquidation of your debt, you can protect and exempt certain amounts of equity in your house. California has a very generous homestead exemption. The exemption is given by California Code of Civil Procedure §704.730(a). The law protects equity in your home in the following amounts:

  • $75,000 is the minimum homestead exemption used mostly by people who are single and not disabled or elderly
  • $100,000 is the amount for a "family unit" (family unit can be debtor who lives with any of the following: spouse, minor child, minor grandchild, minor brother/sister, mother, father, grandmother, grandfather, or an unmarried relative who is 18 or older and unable to take care of themselves.)
  • $175,000 for individuals who meet qualifications as being either: elderly (65 years or older), disabled from employment, or having low income and at least 55 years old.

These equity amounts are updated periodically. Because of this, it is important that you consult with an attorney to make sure bankruptcy is the right option for you and to make sure your home is fully protected.

Categories: Chapter 13, Chapter 7