There’s so much going on between the pandemic and the election that the news I’m about to give you is pretty sure not to come your way, except by me. It may or may not affect you, but you should be aware of a major change in California law.

The homestead exemption law took a major leap for Californians this year with the passage of AB1885. This took the homestead exemption amount someone can use to protect their home, inside or outside of bankruptcy, to a much larger amount.

The law I’ve been practicing under for many years has allowed protection of equity (equity= fair market value of property minus mortgages, HELOCs and other liens and cost of sale) up to $75,000 for a single person, $100,000 for married debtors or debtors with a family in the household, or $175,000 for seniors over 65, or disabled people.

For example, if you had an $800,000 value to your home, but had a mortgage of $700,000, and were married, you’d be OK. But if you had only a $500,000 mortgage you would risk having your home sold if you filed Chapter 7.

Now, starting next year on January 1, 2021, the new amount will be a minimum of $300,000 and a maximum of $600,000 of equity exemption in the household. The amount of the homestead exemption depends on the median price of a home in your county. Most homes cost more than $600,000 in Los Angeles and Orange counties, so you will get protection for $600,000 of equity if your house is in those counties. It will be a little less in San Bernardino and Riverside counties.

So the bottom line is a lot more people can file Chapter 7 bankruptcy without the fear of losing their personal residence. Chapter 13 debtors who chose that chapter because they were afraid of losing their home, may reevaluate their case, and if they qualify for Chapter 7 in other respects may choose to dismiss their Chapter 13 case and refile as a Chapter 7 next year.

I hope you will take in this knowledge either for yourself or your friends and family if they are in financial distress (and many more of us are because of the pandemic) and get evaluated for the more powerful relief that bankruptcy can give next year.

As always, if you have any questions don’t hesitate to reach out, and I hope you’re surviving and even thriving in these difficult times.