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Homestead Exemption California
The California Homestead exemption changes annually, and as of Jan 1, 2024, the minimum is $349,715, and the maximum is $699,421. These are only the minimum and maximum limits, but debtors must use them for their respective counties.
The exemption limits for the counties our firm serves:
Riverside County: $612,122
San Bernardino County: $473,308
Orange County: $1,261,667
San Diego County: $931,918
Los Angeles County: $816,284
Riverside County: $612,122
San Bernardino County: $473,308
Orange County: $1,261,667
San Diego County: $931,918
Los Angeles County: $816,284
California's generous homestead exemption law protects home equity in the event of bankruptcy or other financial distress, offers some tax relief, and ensures Californians can keep their primary residence. The amount of home equity protection changes annually either with inflation or for the countrywide median sales price for a single-family home, whichever is greater. Homeowners can also utilize additional exemptions based on family size, people over 65, and disabled veterans.
Eligibility for Homestead Exemption in California
California has both an automatic and a declared homestead exemption to ensure all homeowners have some protection. To claim the homestead exemption, you must hold an ownership interest in the property and make it your primary residence. Your primary residence is protected regardless of whether it's a single-family home, condo, or boat. The law applies to US citizens and anyone with a primary residence in California. If the transfer of a property was done to default creditors, the homestead exemption can be denied.
California has both an automatic and a declared homestead exemption to ensure all homeowners have some protection. To claim the homestead exemption, you must hold an ownership interest in the property and make it your primary residence. Your primary residence is protected regardless of whether it's a single-family home, condo, or boat. The law applies to US citizens and anyone with a primary residence in California. If the transfer of a property was done to default creditors, the homestead exemption can be denied.
Automatic Homestead Exemption
The automatic homestead exemption §704.730 gives homeowners automatic protection by default. The protection limit is currently the same as the declared homestead exemption, at $699,421. Although your home will be protected against forced sale by creditors, if you decide to sell it yourself, the proceeds from the sale will not be protected from creditors.
The automatic homestead exemption §704.730 gives homeowners automatic protection by default. The protection limit is currently the same as the declared homestead exemption, at $699,421. Although your home will be protected against forced sale by creditors, if you decide to sell it yourself, the proceeds from the sale will not be protected from creditors.
Declared Homestead Exemption
The homeowner must be formally declared with the county's recorder's office to obtain the declared homestead §704.950 status. The declared homestead offers additional legal benefits to the homeowner. In the event of the homeowner's death, a declared homestead can protect the home for the surviving spouse and dependent family members. Suppose you decide to sell your homesteaded property voluntarily. In that case, the declared homestead allows you to use the funds to purchase a new residence or protect some of the proceeds for a certain period after the sale. This can be crucial in maintaining financial stability as you transition to a new home. When you declare your home as your primary residence for protection against certain debts, you can be away from it for up to five years and still keep this protection. This was confirmed in a legal case, Webb v. Trippet, in 1991, where the court ruled to maintain a homestead exemption despite the homeowner's absence, as found in the case details (235 Cal.App.3d 647).
The homeowner must be formally declared with the county's recorder's office to obtain the declared homestead §704.950 status. The declared homestead offers additional legal benefits to the homeowner. In the event of the homeowner's death, a declared homestead can protect the home for the surviving spouse and dependent family members. Suppose you decide to sell your homesteaded property voluntarily. In that case, the declared homestead allows you to use the funds to purchase a new residence or protect some of the proceeds for a certain period after the sale. This can be crucial in maintaining financial stability as you transition to a new home. When you declare your home as your primary residence for protection against certain debts, you can be away from it for up to five years and still keep this protection. This was confirmed in a legal case, Webb v. Trippet, in 1991, where the court ruled to maintain a homestead exemption despite the homeowner's absence, as found in the case details (235 Cal.App.3d 647).
Filing Declared Homestead
To declare your homestead, complete a Declaration of Homestead form and have your signature notarized. The form can be found at any office supply store or downloaded here. If you ever want to remove this protection, you fill out another form called a Declaration of Abandonment of Declared Homestead. The home's owner(s) must also sign and notarize this form.
To declare your homestead, complete a Declaration of Homestead form and have your signature notarized. The form can be found at any office supply store or downloaded here. If you ever want to remove this protection, you fill out another form called a Declaration of Abandonment of Declared Homestead. The home's owner(s) must also sign and notarize this form.
Homes Owned by Companies
Homes owned by companies cannot declare legal homestead status even when the company owner uses the home as their primary residence. In Nowak v. Merrill, No. F071044 (Cal. Ct. App. Jun 21, 2016), the company owner tried to get protection under the Homestead Act but was denied. Although the property was transferred through a series of conveyances, the court ruled the conveyances were void because it was just an attempt to avoid creditors.
Homes owned by companies cannot declare legal homestead status even when the company owner uses the home as their primary residence. In Nowak v. Merrill, No. F071044 (Cal. Ct. App. Jun 21, 2016), the company owner tried to get protection under the Homestead Act but was denied. Although the property was transferred through a series of conveyances, the court ruled the conveyances were void because it was just an attempt to avoid creditors.
How Homestead Exemptions Affect Personal Bankruptcy
The homestead exemption plays a pivotal role in both Chapter 7 and Chapter 13 bankruptcy cases, but it affects them differently due to the nature of each bankruptcy type.
The homestead exemption plays a pivotal role in both Chapter 7 and Chapter 13 bankruptcy cases, but it affects them differently due to the nature of each bankruptcy type.
Chapter 7 Bankruptcy: Liquidation Process
In Chapter 7 bankruptcy, the bankruptcy trustee can sell your non-exempt assets to pay off your debts. The homestead exemption allows you to protect a certain amount of equity in your primary residence, meaning:
In Chapter 7 bankruptcy, the bankruptcy trustee can sell your non-exempt assets to pay off your debts. The homestead exemption allows you to protect a certain amount of equity in your primary residence, meaning:
- You can keep your home if your home equity is less than or equal to the exemption amount. For example, if the homestead exemption in your state is $50,000 and your home equity is $45,000, your home is protected from being sold by the trustee.
- If your home equity exceeds the exemption limit, the trustee may sell your home to pay creditors the amount over the exemption limit. However, you would receive the exemption amount from the sale proceeds. For instance, if your home equity is $75,000 and your state's exemption limit is $50,000, the trustee could sell the home, pay you $50,000, and use the remaining $25,000 to repay creditors.
Chapter 13 Bankruptcy: Repayment Plan
Chapter 13 bankruptcy involves reorganizing your debts and repaying them over a 3- to 5-year period. The homestead exemption affects this type of bankruptcy in the context of how much you must pay unsecured creditors through your repayment plan:
Chapter 13 bankruptcy involves reorganizing your debts and repaying them over a 3- to 5-year period. The homestead exemption affects this type of bankruptcy in the context of how much you must pay unsecured creditors through your repayment plan:
- The exemption determines your home's non-exempt value, influencing your repayment plan. The more equity in your home protected by the homestead exemption, the less non-exempt equity you have to account for in your repayment plan.
- Effects on disposable income calculations: If your home is fully protected (i.e., all equity is exempt), you might not need to increase your plan payments to cover home equity. Conversely, if you have significant non-exempt equity in your home, you may need to propose a plan that repays a larger portion of your unsecured debts to meet the Chapter 13 requirements.
Data Provided by:
California Association of Realtors
Department of Industrial Relations, Division of Labor Statistics
California Association of Realtors
Department of Industrial Relations, Division of Labor Statistics
