close up of hands keeping home with new homestead exemption
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.

California Exemptions Increase for 2022

California bankruptcy exemptions

Californians have a special set of exemptions available only in bankruptcy, since state law prohibits them from claiming the federal bankruptcy exemptions .  Those exemptions are found in CCP 703.140 . (As of this writing, online versions of the code don’t reflect today’s increased numbers.)

Here are the new numbers:

Equity in a residence 31,950
Equity in one or more motor vehicles 6,375
Household goods, clothing, books, animals, musical instrument (value of each item) 800
Jewelry 1,900
Grub stake (also called wild card) unused amount of residential exemption, plus 1,700
Tools of the trade, implements or professional books 9,525
Insurance loan value in policy on debtor or someone on whom debtor is dependent 17,025
Personal injury claim or recovery 31,950

California state exemptions

The other exemption system that Californians can choose in bankruptcy applies also outside of bankruptcy. These classic exemptions are found in CCP 704 . Where those exemptions have a dollar cap, the numbers have increased as well.

Here are the new numbers:

Motor vehicle 3,625
Material for repair or maintain residence 3,825
Jewelry, heirlooms, art 9,525
Tools of the trade 9,525
Money in a deposit account 3.652
Public benefits (per person) 1.900
Loan value of unmatured life insurance policies 30,500

Prepared by Denali Purvis, Bankruptcy Paralegal and RoseAnn Frazee, Bankruptcy Attorney

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