California Bankruptcy Relief Just Got Better for Homeowners - New Law (AB 1885)

Maintaining a home in California is a real struggle for residents going through economic hardship, but there's good news in newly enacted Assembly Bill No. 1885.



Governor Newsom signed AB 1885 into law on September 18, 2020, significantly altering the amount a homeowner can exempt during bankruptcy filing. The bill is aimed at middle-class California homeowners, enabling them to keep their homes in a bankruptcy.


Previously, California Code of Civil Procedure Section 704.730 set the exemption amount between $75,000 and $175,000 depending on circumstances such as homeowner age, disability and income. AB 1885 increases the exemption to between $300,000 and $600,000 depending on the median sale price for a single-family home the year prior.


For Californian residents facing financial challenges, this could mean the difference between losing or keeping their home. The new law protects Californians filing for bankruptcy by preventing creditors from reaching equity in their home up to the exemption applicable in their county. Senator Wieckowski praised Newsom, stating “Protecting people’s most valuable asset by meaningfully updating the homestead exemptions will keep families from falling deeper into debt and economic insecurity… I applaud the Governor for approving this important update.” AB 1885 will go into effect on January 1, 2021.


As amended by AB 1885, Code of Civil Procedure Section 704.730:

AB 1885, Committee on Budget. Debtor exemptions: homestead exemption.


Existing law provides that a specified portion of equity in a homestead, as defined, is exempt from execution to satisfy a judgment debt and prescribes that the amount of the homestead exemption is either $75,000, $100,000, or $175,000, depending on certain characteristics of the homestead’s residents.


This bill would instead make the homestead exemption 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 judgment debtor claims the exemption, not to exceed $600,000. These amounts would adjust annually for inflation.


The people of the State of California do enact as follows:

SECTION 1. Section 704.730 of the Code of Civil Procedure is amended to read:

(a) The amount of the homestead exemption is the greater of the following:

(1) The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000).

(2) Three hundred thousand dollars ($300,000).

(b) The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.




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