Protecting Home in Bankruptcy May Become Easier

When people in the Sacramento area file bankruptcy, often one of their chief concerns is whether they will be able to protect the equity in their homes. The primary tool for protecting that equity is called the “Homestead Exemption.” There are federal exemptions and many states offer different maximum exemptions for folks’ primary residence. Since real estate values vary nationwide, obviously one national standard isn’t very useful. Especially for Californians.

So, as home values continue to rise, it is important that the available exemptions rise with them. Otherwise, more and more people will be likely to lose their homes. Past legislative increases have fallen dramatically behind the increased housing costs in California. There may be good news on the horizon. As soon as today, May 22, 2015, a bill aiming to increase the homestead exemption will be up for a vote on the California Senate floor.

Existing law provides that a specific portion of equity in a homestead, as defined, is exempt from execution to satisfy a judgment debt and prescribed that the amount of the homestead exemption is either $75,000, $100,000, or $175,000, depending on certain characteristics of the homesteads residents. The bill, SB 308, would instead provide that the homestead exemption be increased to $300,000 across the board. This would ensure that hard-working consumers in the Sacramento area would be more likely to save their house when filing for bankruptcy protection. The whole purpose of having a homestead exemption is to provide protection from creditors for a typical home in California. The current numbers are simply inadequate to achieve that goal.

The bill would not just provide relief in the form of an increased homestead exemption. It would also create a new, modest exemption intended to help small business owners get their fresh start. To be specific, it would allow small business owners to claim up to a total of $5,000 for cash or deposit accounts, accounts receivable, and business inventory for those debtors using exemptions under CCP 704. The bill would also make an increase to the automobile exemption, increasing it to $6000.

Consumers can help make these proposals become a reality by contacting their state legislators to encourage them to support this bill. Find your California State Senator at

As a final note, understanding what is exempt from creditors, how the exemptions are calculated, and what law applies in any individual bankruptcy case can be very complicated. Thus, these determinations are best left up to an experienced bankruptcy attorney. If the proper exemptions are not claimed, a consumer debtor may lose her property. Timing is also very important because the law changes from time to time and whether the debtor moved from another state lately makes a difference. See a local, reputable bankruptcy attorney to determine the best exemptions for the particular situation.

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