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Make California Homestead Relevant To 2020

By Cathy Moran

california homestead
homestead bill passed

Governor Newsom signed the bill into law September 18, 2020!


Monday August 31, the Assembly will vote on SB 832 updating the California homestead exemption to reflect today’s home values.

An unexpected move in the legislature pulled the provision for updated exemption amount out of a larger bill, making it vulnerable to a campaign by financial special interest lobbyists interests to defeat homestead protections.

That is, unless members of the California Legislature hear from constituents before Monday’s vote. Send a message now!

How the homestead became outdated

Forty five years ago, the homestead protected an amount almost equal to the median price of a California home. But today, the current homestead equals only about 15% of the median home’s value.

The homestead exemption is supposed to protect families from losing their home. It protects a certain amount of money from the forced sale of the home by unsecured creditors like credit card companies and medical providers.

But as home prices have increased, the current homestead amount comes nowhere close to allowing an ousted family to replace their home.

Worse, the disconnect between the market value of a family home and the homestead makes too many homes vulnerable to forced sale to pay creditors in bankruptcy by a Chapter 7 trustee.

That disconnect also can put Chapter 13 out of reach for distressed homeowners, when their income is insufficient to pay creditors the amount unprotected by the homestead.

Without meaningful protection for the family home, homeowners are effectively barred from bankruptcy protection. They have to choose between submitting to relentless collection action outside of bankruptcy, or filing bankruptcy and giving up their home.

The homestead solution

The legislation up for vote on the 31st puts a floor under the homestead exemption. All California homeowners get a homestead of $300,000. A larger homestead would be available in counties where the median price of a home is more than $300,000, tied to actual local sales, and capped at $600,000.

A homestead exemption more closely in line with today’s economic realities is particularly important to seniors whose life savings are often in their home. Without a meaningful homestead exemption, creditors can gobble up the unprotected equity in the home when seniors need to downsize.

Be heard for a realistic homestead

All it takes to voice your support for SB 832, and its mirror bill AB 1885 is a minute. NACBA, the national organization of consumer bankruptcy lawyers, has created a one click way to find your representative and send a message of support for protection of California home ownership.

act now

Click this link, enter your name and address and NACBA’s VoterVoice will send a message of support for a better homestead law to save California homes. Click now, time is short.

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Filed Under: Featured

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

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Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said "try").

Here, I allow myself to tell stories and express strong opinions on how I think law should work for the consumer and small businesses when it comes to debt.

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