Monday, September 24, 2007

Bankruptcy and the California Homestead Exemption

Question: Can I file for Chapter 7 and still keep my primary residence?

Answer: You need to provide your attorney with more information, namely whether you're behind on your mortgage payments and the amount of equity in your home. There are applicable exemptions for equity up to a certain point. You may be able to keep your primary residence in a Chapter 7, but it depends on many factors that you need to discuss with your bankruptcy attorney.

California's homestead exemption law dictates the amount of equity in your home that you can protect from creditors in a bankruptcy. The exemption amount depends on the several factors, including your age and marital status. If the equity in your home is equal to or less than the allowable homestead exemption and you keep up your mortgage payments, you should be able to keep your home.

The equity in your home is determined by subtracting the value of any liens from the fair market value of the home. Fair market value can be assessed online at websites such as Zillow.com and Yahoo! Real Estate.

Under California law, the default homestead exemption amount is $50,000. The exemption amount increases to $75,000 for a married couple. The exemption amount is $150,000 for people who met any of the following criteria: (1) aged 65 or older; (2) unable to engage in meaningful employment due to physical or mental incapacity; or (3) are 55 or older and meet certain low income requirements.

If you have a large amount of equity in your home, you might lose your home in a Chapter 7 if the trustee decides to sell it. In that case, a Chapter 13 repayment plan might be better for you.

You need to see a local bankruptcy attorney because it is impossible to give you more specific advice without more information about your particular situation.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

1 comment:

jeff said...

I have a deed of trust on a home I sold in 2009. The debtor was paying interest-only payments and the note is due in full in 2011. The payments stopped in January 2009 and the debtor has now file Ch 7 Bankruptcy. Where does all of this leave me and my deed of trust ?