California Homestead Exemption Will Increase In January 2021

On September 2, 2020 the California legislature passed AB 1885 (and SB 832) which will substantially increase California’s homestead exemption.

This is a very important change and will enable many homeowners to eliminate their debts in bankruptcy without having to lose their homes to do so.

The current homestead exemption, under CCP 704.730,  ranges between $75,000 to $175,000 and depends on whether you are single, married, over 65 or disabled, or with low annual income.

California Assembly Bill AB 1885

The new bill (AB 1885), currently under consideration by Governor Newsom,  will increase the homestead exemption to between $300,000 and $600,000 depending on the median sales price of the property in the county in which the property is located.

The homestead exemption protects equity that you have in your home.

In a bankruptcy context, this means that you can keep your home in a Chapter 7 case if you have less equity than the amount of your homestead exemption.

If you do happen to have more equity than the exemption protects, then in a Chapter 13 case, the new homestead exemption will greatly reduce the amount you have to pay to your creditors over time.

Since most homeowners do not have equity in their house that exceed $600,000, or whatever the median sales price is in their county, chances are greatly increased that their home will not be sold in a Chapter 7 bankruptcy.


Image Attribution: “Portrait of a California homesteader receiving the patent to her land, 1895-1905 (CHS-14600)” by  is licensed under CC BY 2.0