As of January 1, 2021 The California homestead exemption has increased. The new law will allow more people to qualify to file for a bankruptcy.

The new legislation Assembly Bill 1885, which was signed by California Governor Gavin Newsom.  This Bill will increase the homestead exemption and will be adjusted accordingly every year based on single family home values of the previous year. This will allow individuals to file for bankruptcy with more equity in their home, You may now have a minimum of $300,000 equity for your home, which was previously only $75,000.  You may also have more equity if your home resides in Los Angeles and the surrounding areas, where the home values are more than the countrywide average. You may have up to $600,000 equity in your home and still file a chapter 7 bankruptcy.  A chapter 7 bankruptcy will wipe out your credit card debt and protect your home from creditors.

What is Homestead Exemption

A homestead exemption is the amount of home equity a homeowner is allowed to have and have their home be protected from creditors. The homestead exemption protects the debtor’s home and the equity on the home from being taken by a creditor. Creditors will not be able to collect the amount owed to them, if you file a chapter 7 bankruptcy, have financial difficulties due to a divorce or your souse passes away. Without the homestead exemption, creditors can collect by obtaining a judgement and garnish the debtor’s paychecks, bank accounts or even force the sale of the home.

California home exemption
California home exemption

How does Homestead Exemption work

As long as your homestead is greater than the equity on your home, you are protected from creditors.  A creditor can not garnish your wages, bank accounts and force the sale of your home.  You may file a chapter 7 bankruptcy, eliminate your debt and not lose your home in the process.

Do I qualify for California Homestead Exemption

You may qualify for a homestead exemption if your home equity is no more than $300.000 to $600,000, You have aquired your home more than 1215 days amd no money was used from creditors to obtain your home.  It is considered fraud if you borrowed money to obtain a home or pay towards mortgage and then file a bankruptcy to prevent the creditor to get their money back.  The homestead exemption will be reduced by that amount.

What if my Equity is more than the Homestead Exemption

If you have more equity than the homestead exemption, you may file a chapter 13 bankruptcy and still pay less than you owe and keep your home.  The amount you owe to creditors will go at the end of your mortgage loan and a 60 month payment plan will be adjusted for you to catch up on your mortgage loan.

Propert Taxes in California

You can get homestead exemption for property taxes.

California Homestead and the IRS

IRS follows federal law and has it’s own rules.  The Homestead doesn’t protect you from the IRS.  The typical action the IRS takes, when they are owed money is to put a lien on your home.  They usually will not force a sale of your home.  Federal law takes precedence over state law.  



The Law Office of Tyson Takeuchi is a federally designated Debt Relief Agency as defined in the 2005 amendments to the United States Bankruptcy Code. This law firm provides legal advice regarding the pros and cons of filing bankruptcy and represents people and small businesses in filing for bankruptcy relief under the United States Bankruptcy Code.
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