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The New Homestead Exemption Law Will Allow More People to Qualify to File for Bankruptcy Protection

The California homestead exemption (protected equity) is a regulation that safeguards a homeowner’s principal residence from creditors in the case of bankruptcy, a judgment creditor, or death of a spouse.

Under California law, a specified portion of equity in a homestead is exempt from execution to satisfy a judgment debt. The prior law set the amount of the homestead exemption at either $75,000, $100,000, or $175,000, depending on certain characteristics of the homestead’s residents.

In September, 2020, California Governor Gavin Newsom signed Assembly Bill 1885 into law, effectively increasing the homestead exemptions throughout the State. The new law increases the homestead exemption to the greater of $300,000 or the countywide median sale price of a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed $600,000. These amounts adjust annually for inflation and the new law took effect on January 1, 2021.

To better understand the new homestead exemption law, the following are projections for a few of California’s major urban areas and rural areas to compare and contrast:

  • Los Angeles County: $600,000 (Estimated $664,500 Median)
  • Riverside County: $400,500 (Estimated $400,500 Median)
  • San Bernardino County: $370,215 (Estimated $370,215 Median)
  • Orange County: $600,000 (Estimated $746,377 Median)
  • San Diego County: $600,000 (Estimated $660,000 Median)
  • San Francisco County: $600,000 (Estimated $1,161,296 Median)
  • Tulare County: $300,000 (Estimated $255,675 Median)
  • Modoc County: $300,000 (Estimated $144,131 Median)

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