The old joke about banks is that they only lend money to people who don’t really need it.
The California homestead law has the same problem.
Just when you need it most, the homestead is only partial protection.
The California Assembly is going to vote this month on whether or not to fix the homestead.
Make homestead amount genuinely meaningful
Forty years ago, California’s homestead protected 75% of the value of the average home. Now, it protects less than 25%. See how far behind the market exemption has become.
All too many Californians see the equity in their home as their retirement “plan”. With the high cost of real estate, buying a home often squeezes out genuine retirement savings.
SB 308 will bring homestead protection closer to today’s housing costs: $100,000 for a single person; $150,000 for a family; and $300,000 for seniors.
Senator Wieckowski’s bill makes other much needed changes: creating a small exemption for the self employed; increasing the exemption for a reliable car; and protecting alimony and child support.
Better bankruptcy exemptions
Close to my heart as a bankruptcy lawyer, SB 308 makes two critical changes to how California exemptions operate when someone files bankruptcy.
Now, if a home is sold in the course of a bankruptcy case, the homestead exemption is protected only if the homeowner buys a new house within six months. If the homeowner can’t buy a new home, the exemption money goes to creditors!
I saw this in one of my cases: the debtors sold their home and moved into former rental they owned. They used the homestead proceeds to cure the mortgage default on the rental.
Held, they had not “acquired” a new homestead, since they already owned the former rental. They got no homestead in their current home and no protection for the $75,000 they paid toward the mortgage. Bruce homestead decision
Somehow the law has morphed from protecting people to protecting only people who can buy new homes.
The second bankruptcy-focused change removes the requirement that an estranged spouse consent to the filing spouse’s choice of exemptions.
When the estranged spouse is missing or uncooperative, the person needing bankruptcy relief can’t make the best choice of exemptions needed for a fresh start.
That needs to change.
California Assembly needs a prod
Last time the Assembly considered SB 308, a number of representatives ducked the issue. The bankers association claimed the bill helped only the wealthy.
Nonsense. My bankruptcy clients weren’t wealthy by any means. Few seniors facing the estimated $240,000 of out-of-pocket portion medical expenses in retirement are wealthy.
This year, a broad coalition of consumer, seniors, and labor groups have joined forces to urge assembly members to bring California exemptions into the 21st century.
Add your voice. Don’t let your representatives absent themselves when SB 308 comes back for a vote in June.
Use this link to send a quick message to your assembly representative asking for a vote in favor of SB 308.
Better yet, pick up the phone to your assembly representative and ask for support. Send an email or a fax. But make yourself heard. You can bet the financial industry is loud in opposition.
Another tool to find your assembly representative and their contact information.
The people making the laws need to hear from us.