The Homestead exemption in the state of California will protect a certain amount of home equity that a homeowner carries from their creditors. In the event that you would like to file for bankruptcy, under California law you can access a homestead exemption that protects a substantial portion of the equity in your home. Previous equity protections were capped at just $100,000 in the state of California but as of January 1, 2021, an increase in these protections makes it much more advantageous for homeowners to choose bankruptcy as a financial solution. With homestead exemptions increasing to $300,000 in many parts of the state, police exemptions are helping many people that are experiencing financial difficulty to keep their homes or access equity that they’ve invested in their homes to get into other housing.
How A Homestead Exemption Can Protect You
If you owe a debt to your creditors there is a chance that you could be sued. When you get a judgment against you the creditor will have the right to collect upon the judgment. Most of the ways that creditors will garnish based off of the judgment means taking funds from your paycheck or directly from your bank account. Creditors can also work at seizing assets in order to pay the rest of the judgment. This often leads to problems with forced seizure with vehicles, business assets or even your family home.
What a homestead exemption adds is protection. Every state has laws protecting a certain amount of your assets during a bankruptcy claim or when creditors decide to start collecting. Protective laws are called exemptions and the Homestead exemption provides security to a specific amount of equity that you have in your home.
A homestead exemption can protect you from multiple creditors as well as one particular creditor with a large judgment against you. This means that if you filed for a business bankruptcy and a personal bankruptcy, you will have a dual level of protection if you ran your business out of your home or you have a specific amount of equity in a business property but you rent your home.
Unless a creditor has specific rights against your home through a series of liens or they are the main mortgage holder, you will have a form of Homestead protection against that debt.
In an example of these protections, if you have a home that’s worth $450,000 and you have a mortgage for $400,000, you’ve got access to $50,000 equity in your home. Under old homestead exemptions you would be able to protect the $50,000. With new homestead exemptions you would be able to protect even more value in your home.
Under the latest increases that went into effect on January 1, 2021, people in the state of California will have access to up to $300,000 in Homestead exemption qualifications. If you live in a county where the median price is above $300,000 or even $600,000, the exemption will be put into place to save your added equity in the home.
Checking In With Your County
Not every county in the state of California has a median home price that reflects the new exemption. Under new exemption standards, you could potentially access up to $600,000 and exemptions based off of the median home price. In the County of San Bernardino however you might only be able to access $350,000 in exemptions. If your county’s median sale price is in excess of $300,000, you might be able to access more equity in your home and a greater level of protection if you chose to apply for a bankruptcy or a ruling was made against you.
If you are starting the process of a bankruptcy or you could use assistance with creditors, contact our skilled bankruptcy attorneys today.