California’s new homestead exemption limit allows more people to keep their homes in Chapter 7 Bankruptcy
. A Chapter 7 is for consumers with limited assets or certain businesses that wish to liquidate or dissolve their operations. This chapter has a qualifying criteria for individuals (household income) and most debts are wiped out entirely. A Chapter 7 is the “Fresh Start”
bankruptcy causing an individual to be free from most consumer debt. While a Chapter 7 bankruptcy is commonly referred to as a liquidation bankruptcy, most individuals will not have to sell any of their possessions.
Under California Law, there are a number of assets that are protected when you file for bankruptcy. The homestead exemption protects the debtor’s home and its equity from being seized by creditors. California’s homestead exemptions significantly increased in 2021. The homestead amount was increased to the median sales price of the county that the home is located in, subject to a cap that is adjusted annually for inflation. The homestead exemption in California in 2021 had a minimum value of $300,000 and a maximum value of $600,000. In 2022, the adjusted California homestead exemption minimum is $313,200 and is capped at $626,400.
Therefore, homeowners may be able to file for Chapter 7 bankruptcy while keeping their home.