New Law Gives California Homeowners More Protection from Debt Collectors and Bankruptcy Trustees
On September 18, 2020, Governor Gavin Newsom signed AB 1885 into law. http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB1885. The new legislation gives homeowners added protection against efforts to collect a debt by forcing the sale of the debtor’s home.
Until now only a relatively small portion of the equity in one’s home could be protected from collection of a debt. For example, existing law prescribes that the amount of equity protected (the “Homestead Exemption”) is either $75,000, for singles, $100,000, for married couples, or $175,000, for seniors. These days many homeowners in California have much more than that, Additionally, each year inflation erodes the value of these amounts.
However, the new law, which took effect on January 1, 2021, increases the “collection protection” to the greater of $300,000 or the countywide median sale price of a single-family home in the calendar year prior to the calendar year in which the the homeowner claims the exemption, not to exceed $600,000.
Another plus: these amounts would adjust annually for inflation.
The new law also provides the same protection to individuals who file a bankruptcy. It allows a homeowner to eliminate a greater amount of debt without putting his or her home at risk.
If you’ve been told that you can’t file for bankruptcy because you have too much equity in your home, you may have another chance come January 1, 2021.
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Mark E. Brenner, Esq.
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