Homestead exemptions increased from $ 300,000 to $ 600,000 –

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Does that ring true? It’s almost unbelievable, but it’s true. California Governor Gavin Newsom enacted the 1885 Assembly Bill and it’s the current homestead exemption law in effect in 2021!

This is monumental because the old law provided the following exemptions for family properties:

If single, $ 75,000. If under 65 with another family member in the household, $ 100,000. If over 65, then $ 175,000. If over 55s earn less than $ 35,000 gross per year for the household, $ 175,000.

All of these qualifications for protecting your property and so little protection for properties in California where values ​​have risen a lot.

With the pandemic and so many people losing their jobs, despite the stimulus measures, many people are struggling to pay off their home mortgages. At the same time, people have to resort to their credit cards only to survive the pandemic. What will happen then when life returns to normal or almost normal with the virus defeated by the vaccine when at least 80% of the population is vaccinated? People will end up with significant credit card debt while still keeping their homes.

Look at the amendment and see if you understand it.

The residents of the State of California enact the following:

ARTICLE 1. Article 704.730 of the Code of Civil Procedure is amended as follows:

704,730. (a) The homestead exemption amount is the greater of:

(1) The county-wide median sale price for a single-family home in the calendar year preceding the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($ 600,000).

(2) Three hundred thousand dollars ($ 300,000).

(b) The amounts specified in this section will be adjusted annually for inflation, effective January 1, 2022, based on the change in the California Consumer Price Index for all urban consumers for the previous fiscal year, published by the Industrial Relations Department.

So this is it. Simply put, this means that depending on the county you live in, your homestead exemption is at least $ 300,000, but it could go up to $ 600,000! This applies to the equity in your home. What is fairness? It is the fair market value of your home, less all mortgages and secured liens on it. For example, you live in Los Angeles and the fair market value of your house is $ 700,000. You owe a balance of $ 300,000 on the first mortgage. This means that the equity in your home is $ 400,000.

Under the old law, if you wanted a fresh start with Chapter 7 – because you owed $ 30,000 in credit card debt and you’re over 65, or under 65, or single, and you would otherwise qualify for Chapter 7 under the means test – you would not file for Chapter 7 relief. Instead, you would file for Chapter 13 where the $ 30,000 would be paid over 5 years without interest. . If you filed a Chapter 7, you would lose your house to the Chapter 7 Trustee who will sell your house and give you either $ 175,000, $ 100,000 or $ 75,000, and use the remainder of the sale proceeds to pay off. the full $ 30,000 plus the expense of administering your bankruptcy estate which costs a lot, maybe $ 50,000. The rest of the proceeds would still go to you, but you lost your house in Chapter 7. That’s under the old law.

Under the new law now in effect, your age or being single does not affect your ability to claim the massive $ 400,000 homestead exemption. You would still qualify for Chapter 7 assuming you pass the means test, keep your home, and eliminate the $ 30,000 in credit card debt! That’s how great this amendment increasing the homestead exemption is. Instead of a BB pistol, you now have a .50 caliber machine gun to protect your home.

This means that more debtors will be eligible for the Chapter 7 fresh start without losing their homes. It is a very big deal indeed. It is certainly a very welcome relief given to debtors who have substantial equity in their homes but are also struggling with heavy credit card debt. Probably without this pandemic, this amendment would not have been adopted. Really, what’s a paltry $ 75,000 to $ 175,000 exemption for family properties in LA, Orange and Riverside counties? They don’t protect people enough here.

The effect of these small homestead exemptions is to force debtors to put their homes in jeopardy just because they have credit card debt that got out of hand. If you owed $ 30,000 in credit cards, that would consume $ 1,000 of your monthly net income. If your household net income is $ 3,000, that’s already a third of your net income allocated to keep your $ 30,000 of credit cards up to date, instead of going to pay your mortgage or other expenses. required. The $ 30,000 might not sound like big, but the cost of keeping up to date is huge – $ 1,000 a month is $ 36,000 in three years just to keep $ 30,000 up to date. After paying $ 36,000, you still owe the same $ 30,000! You are literally enslaved and MasterCard and Visa own you. You can repay a car loan in five years. After paying, you own a car; you owe $ 30,000 in credit cards, the cards belong to you.

I want to thank, as we all should, Almighty God for giving us this new law amending and increasing the homestead exemptions to $ 300,000 to $ 600,000. It is truly divine. It is manna from heaven. It is truly divine protection for debtors who are in need of debt relief.

If you need debt relief, please make an appointment to see me. I will analyze your case personally.

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DISCLAIMER: NONE OF THE FOREGOING IS CONSIDERED LEGAL ADVICE. EACH CASE IS DIFFERENT.

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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South, Suite 10042, Alhambra, CA 91803.

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