Bankruptcy/IRS Tax Resolution Attorney, Marvin Mann, Redondo Beach, CA
What you have to check for to make sure the bankruptcy court does not seize your home.
One of the factors that you must consider when filing bankruptcy and you have a home, is how much equity do you have in your home (if you sold your home, how much money would you put in your pocket).
If you have too much equity, the Chapter 7 trustee will want that equity to pay back your unsecured creditors.
Prior to January of 2022 California homestead was rather meager, essentially $75,000 to $175,000. It was some help, but home prices have been rising over the years, and the exemptions was not helping as much as it was before.
Then this year effective January 1, 2022, the adjusted California homestead exemption is $313,200 at a minimum and capped at $626,400.
We can breathe again, people with financial problems, and equity in your home can file bankruptcy if you do not have excessive equity in your home.
In Los Angeles County you are allowed $626,400 equity. So, If your home is worth $750,000, but you have an outstanding $200,000 loan that leaves you $550,000 worth of equity, $550,000 is less than $626,400 therefore the bankruptcy trustee would not want to take your home.
ALERT-WILL ROBINSON-ALERT
There is one little exception, that limits your exemption.
Per Federal Register 11 USC Section 522(p)—state homestead exemption, limit for interest acquired 1215 days (approx. 3yr 3mo) before filing from $170,350 to $189,500.
A debtor may not exempt any amount of interest acquired by debtor acquired during the 1215 days period prior to filing the petition that exceeds $189,500.
So using the above example:
So using the above example:
Home worth $750,000
Loan $200,000
Equity $550,000
Purchase 2yr ago (less than 1215 days)
Amount of equity you can claim $189,500
Leaving exposed for trustee $360,500
Conclusion: If considering bankruptcy, take into account the purchase date of your home to ensure you are not limiting the amount of your exemption. If you have a home, please check with a bankruptcy attorney OR us prior to filing.
