Law Office of Rick Morin, PC

The Homestead Exemption in Chapter 7 Bankruptcy is very important. If you are filing for Chapter 7 Bankruptcy in Sacramento and own a home, you need to read this blog.

A Chapter 7 Bankruptcy is considered a liquidation bankruptcy. This means that the Bankruptcy Trustee assigned to your case can take your assets from you and sell them to repay your creditors. In a vast majority of cases, no assets are taking from the bankruptcy filer. Why is that? Because of things called Bankruptcy Exemptions.

What Are Bankruptcy Exemptions?

In California, there are laws that allow a bankruptcy filer to keep a certain amount of property. These exemptions are not unlimited — a super wealthy person probably wouldn’t want to file for Chapter 7 bankruptcy. However, for most people, the bankruptcy exemptions in California are generous enough so that they don’t lose their household goods, cars, jewelry, or other normal items.

If a bankruptcy filer owns a house, things get more complicated. If the market value of the house is more than the amount owed on the loan, then the house is said to have “equity.” And this equity must be treated like an asset and protected with a Bankruptcy Exemption. This will protect the house.

The Bankruptcy Homestead Exemption

A bankruptcy filer can keep protection under the Homestead Exemption if they have equity in their home. But again, this exemption is not unlimited. If the bankruptcy filer has too much equity in their home, the Bankruptcy Trustee can sell the house and use the proceeds to help pay down the bankruptcy filer’s debts.

How much is too much? The Homestead Exemption and other California Exemption numbers are changing all of the time. I don’t want to put down the specific numbers here on the blog because they won’t always be accurate in the future.

Suffice to say: if you are considering a Chapter 7 bankruptcy and you have equity in your home, you really need to meet with a qualified bankruptcy attorney. A mistake here can have grave consequences.

I help homeowners in Sacramento protect their homes with the Homestead Exemption in Chapter 7 Bankruptcy. Please call my office at (916) 333-2222 to determine whether bankruptcy is right for you.