【破产法】SECTION 704.730 AMENDED INCREASING HOMESTEAD EXEMPTIONS TO $300,000 TO $600,000
02/27/2021 楊清泉律師事務所SECTION 704.730 AMENDED INCREASING HOMESTEAD EXEMPTIONS TO $300,000 TO $600,000
Does this sound right? It’s almost incredible. But it’s true. The Governor signed assembly Bill No. 1885 into law and it is the current law on homestead exemptions effective 2021! This is monumental because the old law provided the following homestead exemptions:
If single $75,000. If below 65 with another family member in the house $100,000. If over 65 then $175,000. If over 55 earning a gross of less than $35,000 a year for the household $175,000.
All these qualifications for the protection of your homestead and so little protection for homesteads in California where values have been increasing a lot.
With the pandemic and so many people losing their jobs, despite the stimulus, a lot of people are having a hard time paying for the mortgages on their homes. At the same time, people are having to resort to using their credit cards just to survive the pandemic. What will happen then when life goes back to normal or near normal with the virus beaten by the vaccine when at least 80% of the population is vaccinated? People will end up with a significant amount of credit card debt while holding on to their houses.
Look at the amendment and see if you understand it:
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 704.730 of the Code of Civil Procedure is amended to read:
704.730. (a) The amount of the homestead exemption is the greater of the following:
(1) The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000).
(2) Three hundred thousand dollars ($300,000).
(b) The amounts specified in this section shall adjust annually for inflation, beginning January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.
So there you are. In plain language what it means is, depending on which county you live in, your homestead exemption is at least $300,000 but it could be as high as $600,000! This applies to the equity of your house. What is equity? That’s the fair market value of your house, minus all mortgages and secured liens on it. For example, you live in Los Angeles and your house fair market value is $700,000. You owe a balance of $300,000 on the first mortgage. This means the equity in your house is $400,000.
Under the old law if you wanted a fresh start with Chapter 7 because you owed $30,000 of credit card debt, and your age is over 65, or under 65, or single, and you otherwise qualify for Chapter 7 under the means test, you would not file for Chapter 7 relief. Instead you would file for Chapter 13 where the $30,000 would be paid over 5 years with no interest. If you did file a Chapter 7, you would lose your house to the Chapter 7 trustee who will sell your house and give your either $175,000, $100,000 or $75,000, and use the rest of the sale proceeds to pay the $30,000 in full plus expenses of administering your bankruptcy estate which costs a lot, maybe $50,000. The rest of the sale proceeds would still go to you but you lost your house in Chapter 7. This is under the old law.
Under the new law in effect right now, your age, or being single doesn’t affect your ability to claim the huge homestead exemption of $400,000. You would still qualify for Chapter 7 assuming you pass the means test, keep your house, and wipe out the $30,000 of credit card debt! That’s how awesome this amendment increasing the homestead exemption is. Instead of a BB gun, you now have a .50 caliber machine gun to protect your home.
This means more debtors will qualify for Chapter 7 fresh start without losing their houses. This is a very big deal indeed. It certainly is very welcome relief given to debtors who having substantial equities in their homes but are also saddled by burdensome credit card debt. Probably without this pandemic, this amendment would not have been adopted. Really, what’s a paltry $75,000 to $175,000 homestead exemption for LA, ORANGE, AND RIVERSIDE COUNTIES? They just don’t give enough protection to people here.
The effect of these small homestead exemptions is the force debtors into putting their homes at risk just because they have credit card debt that have escalated beyond control. If you owed $30K of credit cards, that would eat up $1K of your net income monthly. If your household net income is $3K, that’s already one third of your net income allocated to keep your $30K of credit cards current, instead of going to pay your mortgage or other necessary expenses. The $30K may not look big, but the cost of keeping that current is tremendous. $1k a month is $36K in 3 years just to keep $30K current. After paying $36K, you still owe the same $30K! You are literally enslaved. MasterCard and visa own you. You can pay off a car loan in 5 years. After pay off, you own a car; you owe $30K of credit cards, the cards own you.
I would like to thank, as we all should, God Almighty for giving us this new law amending and increasing the homestead exemptions to $300,000 to $600,000. This is really heaven sent. It’s manna from heaven. This is truly divine protection for debtors who need relief from debt.
If you need debt relief, please set an appointment to see me. I will analyze your case personally.
“GOD SAYS, ‘I WILL SAVE THOSE WHO LOVE ME AND WILL PROTECT THOSE WHO ACKNOWLEDGE ME AS LORD. WHEN THEY CALL TO ME, I WILL ANSWER THEM; I WILL RESCUE THEM AND HONOR THEM. I WILL REWARD THEM WITH LONG LIFE; I WILL SAVE THEM.” PSALM 91. Written by Moses a long time ago, maybe 3000 years ago.
Lawrence B. Yang is a graduate of Georgetown University with a Master’s Degree in Law and specializes in Bankruptcy, Business, Real Estate and Civil Litigation. He speaks English, Mandarin and Fujian and has successfully represented thousands of clients in California, including companies overseas. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.
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