{"id":1060,"date":"2020-09-11T19:54:54","date_gmt":"2020-09-11T19:54:54","guid":{"rendered":"http:\/\/www.fremont-bankruptcy-attorney.com\/blog\/?p=1060"},"modified":"2020-09-28T17:18:28","modified_gmt":"2020-09-28T17:18:28","slug":"keep-your-house-protect-up-to-600000-in-equity-discharge-all-debts-when-filing-bankruptcy-in-california","status":"publish","type":"post","link":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/2020\/keep-your-house-protect-up-to-600000-in-equity-discharge-all-debts-when-filing-bankruptcy-in-california\/","title":{"rendered":"Keep Your House, Protect Up To $600,000 In Equity, Discharge All Debts When Filing Bankruptcy in California"},"content":{"rendered":"\n

By Ryan C. Wood<\/a><\/p>\n\n\n\n

California is finally about to increase the homestead\nexemption pursuant California Civil Procedure 704.  This is the exemption under California State\nlaw that protects equity in a primary residence when filing for bankruptcy.  It is almost a certainty that on or before\nSeptember 30, 2020, Governor Newsome will sign into law this change.  <\/p>\n\n\n\n

THIS\nIS WONDERFUL NEWS GIVEN THE HOMESTEAD EXEMPTION HAS NOT INCREASED WITH THE COST\nOF LIVING OR INFLATION FOR MANY YEARS. \nIT WILL ALSO HELP TO PROVIDE RELIEF FOR FAMILIES HIT HARD BY COVID-19\nWHILE ALLOWING THEM TO KEEP THEIR HOME.<\/strong><\/p>\n\n\n\n

It apparently is not an \u201cif\u201d but \u201cwhen\u201d will AB 1885 become law.\u00a0 AB 1885 will substantially increase the California Homestead exemption pursuant to CCP 704 to the greater<\/strong> of $300,000 or median sales price in the county where the single-family home is located in the prior year, though this cannot exceed $600,000.\u00a0 Since median sale price in most Bay Area counties is over $1,000,000 Bay Area homeowners will get the full $600,000 exemption to protect equity.\u00a0 This is great news for bankruptcy attorneys<\/a>.\u00a0 We will be able to use the law, the Bankruptcy Code, to obtain permanent relief for more homeowners with a lot of equity in their homes.\u00a0 <\/p>\n\n\n\n

What\nThis Means For Homeowners in California?<\/strong><\/p>\n\n\n\n

It opens the door for so many people in the Bay Area\nthat are cash poor but house rich to seek relief from their creditors under the\nBankruptcy Code and not lose their home. \nIn the Bay Area the median house price in many counties, if not all of\nthem, is above $1.2 million.  That means\nBay Area homeowners will be permitted to exempt or protect up to $600,000  in equity in their home while still\ndischarging 100% of their credit card debts or other general unsecured claims\nlike medical debts or personal loans.<\/p>\n\n\n\n

For\nExample<\/strong><\/p>\n\n\n\n

A homeowner in San Mateo County owns a home that is\nworth $1.4 million with a first mortgage that is owed $750,000.  The homeowner is struggling with various real\nworld bills such as credit card payments, a vehicle loan and other normal\nliving expenses.  They are current with\ntheir mortgage payments, property tax and property insurance though so there\nare no issue with the house. \nUnfortunately due to COVID-19 or some other circumstance outside of\ntheir control their income decreased and things are too tight to continue each\nmonth.  Given the homestead exemption in\ntheir county, San Mateo County, is $600,000, the could file chapter 7 or\nchapter 13 bankruptcy and  their house is\nentirely safe.  $1.4 million – $750,000 =\n$$650,000.  Then you have to deduct the cost\nof sale of the house too, approximately $70,000, leaving $580,000 to the seller\nif they chose to sell\/liquidate the house. \nAgain, we will now have a homestead exemption of $600,000 to protect the\n$580,000 so there is no issue under this example.  You can plug in your numbers to see how\nthings might look like for you.  Also\ntaxes on the gain should be also taken into account.<\/p>\n\n\n\n

Issues\nto Consider Under CCP 704 In California<\/strong><\/p>\n\n\n\n

The single most troubling part of the California Homestead exemption to protect equity in a primary residence or dwelling is the reinvestment provision of CCP 704.720(b).\u00a0 CCP 704.720(b) requires any exempted amount obtained from the sale of the property must be $been all kinds of litigation regarding this issue and if you want to hang your hat on reading between the lines or gambling with as much as $600,000 in equity in your home after you sell be\u00a0 my guest.\u00a0 I will not be part of that scenario.\u00a0 As an experienced bankruptcy attorney<\/a> I counsel clients to go down the road we know there is a bridge over the river that is solid so we can safely get across.\u00a0 That does not mean there will not be bumps in the road.\u00a0 Just that I rarely have clients that can afford to pay me to strengthen a flimsy bridge or build a bridge entirely so they can cross safely (argue for a different interpretation of the law or create new law).\u00a0 We generally want to go down the road that is safe even if that road is longer, bumpier and there may be some other parts of that road that are unpleasant.\u00a0 It just will not be the road to losing $600,000 in equity in a sold house.\u00a0 To read more about this issue go to:<\/p>\n\n\n\n

https:\/\/www.courtlistener.com\/pdf\/2016\/08\/08\/in_re_jesus_bencomo.pdf<\/a><\/p>\n\n\n\n

Another\nExample<\/strong><\/p>\n\n\n\n

You have $90,000 in various general unsecured such\nas credit cards, personal loans and medical debts.  Your gross monthly income is around $16,000\nbetween yourself and your spouse.  You\nalso have two children under the age of 18 for a total household of 4 people in\nSan Mateo County.  Your house is worth $1.4\nmillion and you owe $1,160,000 on the first and only mortgage.  Your monthly mortgage payment plus property\ntax and insurance is about $6,200 a month or 38% of your gross income.  The median income for a household of 4 people\nin the State of California is currently a gross of $101,315 for the year.  Your gross income is over the median income $90,685\na year.  That is okay; you just need to\npass the means test to qualify for a Chapter 7 bankruptcy and discharge the\n$90,000 or in Chapter 13 determine if there is any obligation to general unsecured\ncreditors, the $90,000, in the Chapter 13 Statement of Monthly Disposable\nIncome.  After taking into account taxes,\nmonthly mortgage payment it is highly likely someone with these general set of\nfacts can discharge the entire $90,000 in general unsecured debt, keep their\nhome and life will go on unchanged.  This\nis the law and filing for bankruptcy is just following the law to legally\ndischarge debts and lead a happier life.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Ryan C. Wood California is finally about to increase the homestead exemption pursuant California Civil Procedure 704.  This is the exemption under California State law that protects equity in a primary residence when filing for bankruptcy.  It is almost a certainty that on or before September 30, 2020, Governor Newsome will sign into law […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[61],"tags":[20,359,363,364],"_links":{"self":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts\/1060"}],"collection":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/comments?post=1060"}],"version-history":[{"count":1,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts\/1060\/revisions"}],"predecessor-version":[{"id":1061,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts\/1060\/revisions\/1061"}],"wp:attachment":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/media?parent=1060"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/categories?post=1060"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/tags?post=1060"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}