The Homestead Exemption in California is a valuable resource available to homeowners who meet certain qualifications. This exemption can help safeguard the equity in your residential property, both within and outside of a bankruptcy proceeding.
To make the most of this resource, it’s important to understand the process and requirements involved. This article will provide a comprehensive guide on how to utilize the California homestead tax exemption. Including how much equity it can protect, how to file for it in a bankruptcy case, and even how to apply for it if you don’t plan on filing for bankruptcy.
The California Homestead Exemption in Bankruptcy
Some states allow bankruptcy filers to use the federal bankruptcy exemption instead of the state-based system. However, California is not one of those states. If you live in California and qualify for bankruptcy exemptions, you will have the option to choose from one of California’s two exemption systems. Since you cannot combine exemptions, you must choose the one that protects the most of your property.
California’s System 1 allows homeowners to exempt equity up to $600,000. While in California’s System 2, homeowners can exempt equity up to $31,950.
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Protect Your Property with the California Homestead Exemption
In California System 1, you can claim the homestead exclusion for any property that you use as your primary residence. Including a mobile or boat home, a stock cooperative, a community apartment that is part of a larger development, or a rental property. You can also claim the homestead exclusion in System 1 if your home was forcibly sold within six months prior to filing for bankruptcy.
The homestead exemption is available in California System 2 as well. This exemption applies to any property that the debtor or the debtor’s dependents use as a residence.
Furthermore, the homestead exemption is also available as a wildcard. You can use any remaining portion of the homestead exemption to protect other assets beyond your home equity. This additional amount is on top of the $1,700 wildcard exemption that is available in both systems.
How Long You Must Own the Homestead
To claim the full value of the homestead exemption, you must have owned the property for at least 1,215 days before filing for bankruptcy. If you don’t meet this requirement, federal law limits your homestead exemption to $189,050. This limitation applies to cases filed between April 1, 2022, and March 31, 2025.
To learn more about the bankruptcy homestead exemption, you can consult with Tenina Law’s bankruptcy attorneys.
Married Couples Can’t Double Most Exemptions in California
In certain states, married couples who file joint bankruptcy petitions can double their homestead exemption. However, California does not allow married couples to take advantage of this double homestead exemption. Therefore, if you file for bankruptcy in California as a married couple, you will only be able to claim the homestead exemption once.
In California, You Don’t Need to Declare a Homestead When Filing for Bankruptcy
You can claim the homestead exclusion when you fill out your bankruptcy paperwork. To claim the homestead exclusion, you need to list it in Schedule C, which is where you declare the property that you’re claiming as exempt.
Homesteading Your California Home If You Don’t File for Bankruptcy
In some cases, filing a homestead in the county where your property is located can protect your house from judicial liens, but it’s not always applicable. A creditor can file a judicial lien after winning a court case against you. To prevent the lien from being attached to your property, you need to file a homestead statement first.
However, even with a homestead exemption, it’s not guaranteed to fully protect you. If your property is foreclosed, the proceeds will first go towards paying off your mortgage, child support and spousal maintenance arrears, and tax liens. You will receive the remaining amount up to your homestead, but any excess amount will be used to settle judicial liens.
The process of homestead filing is complicated, and this is just a simplified version. It’s recommended to seek advice from a California bankruptcy lawyer to help you understand the process. As well as determine if a homestead exclusion is suitable for your situation.
Where to Find the California Homestead Exemption Statutes
The System 1 and System 2 homestead exemptions in California can be located in the California Code of Civil Procedure. California Code of Civil Procedure §§ 704.010 et seq. contains the System 1 homestead exemption, while the System 2 homestead exemption is located in California Code of Civil Procedure § 703.140(b)(1).
Need More Help About Homestead Exemption in California?
If you’re considering bankruptcy and want to protect your home from creditors, a homestead exemption may be a valuable option for you. At Tenina Law, we have extensive experience in helping clients navigate the complexities of bankruptcy and homestead exemptions.
Our team can guide you through the process of filing for a homestead exemption and ensure that you receive the maximum protection for your home. We understand that your home is more than just a piece of property – it’s a symbol of your hard work and dedication.
Let us help you keep your home while achieving financial stability. Contact us today to schedule a consultation and learn more about how we can assist you.