What is the Homestead Exemption and its New Rules in 2023
Many clients know there are some protections of your assets should you find yourself in bankruptcy or creditor trouble in general, many are unsure as to their options and exactly what is or can be protected. One of the most important protections is the homestead exemption.
While the rules for homestead exemptions vary by state, here in California, we recently had an increase in the exemption to $678,378 in 2023. The actual amount will equal the prior year’s median home sale price amount if it is within in this range. To put it simply, your specific exemption limit will be the median, not the average, home sale price from the prior year for your county.
In case you are unaware, a homestead exemption protects home equity from a homeowner’s creditors, up to a certain dollar amount, as previously mentioned. This means creditors are precluded from collecting funds within this amount to settle past-due debt. This protection applies if you were to file for bankruptcy or experience financial troubles stemming from things like a divorce, certain types of judgements, or the death of a spouse and can even cover property tax troubles.
To be clear, the homestead exemption is on one’s principal residence, not a second home or commercial property, and by default, does not prohibit the sale of property. However, if the equity you have in your home is lower or equal to your homestead exemption, then your home is fully protected from creditors. A creditor cannot force the sale of your property. However, if your home equity is higher than your exemption, then you may be subject to a forced sale. From the sales proceeds, you would still receive your exemption limit, but any other funds collected from the sale go towards satisfying debts such as the mortgage, liens on the property, property taxes, etc.
There are far more intricacies and nuances but this provides an initial overview of the significant benefit the homestead exemption provides.
Asset Protection and Why it is Important
Bankruptcy can be more than just a way to alleviate debt; it is also an effective tool for protecting one’s valuable and sentimental possessions. An experienced bankruptcy attorney, familiar with the law’s nuances, understands how to utilize this legal pathway so that their clients may safeguard any intangible or tangible investments of importance in their lives.
Bankruptcy laws offer amazing opportunities for individuals to protect their hard-earned wealth and assets. Through something known as an exemption, houses, cars, personal items, and even those all important retirement accounts can remain safe from any bankruptcy filings! Sometimes, life happens, but don’t lose hope if you’re ever in a situation where this may be necessary as your financial security is not out of reach.
Clients who become victims of wage garnishment or debt collectors trying to take their hard-earned money face a difficult situation. This is often due to “lenders” looking to take advantage by providing unaffordable loans that leave clients with no choice but to risk depleting valuable assets in order to pay the loan off. Bankruptcy can help protect retirement accounts and provide long-term safety for family investments, such as health care, schooling costs and savings plans – ensuring financial security comes first!
In the event of financial hardship, it is possible to negotiate a fair outcome with creditors or bankruptcy trustees and retain ownership of your car or valuable possessions. Rather than forfeiting these assets, an advantageous agreement may be made where money replaces them instead.
If you need the legal assistance you deserve, one that is compassionate and understands the complexities of the law in all its many facets, call the Joshi Law Group! We are here to make sure you find the path out of this financial maze and towards a brighter future.
Contact Us For A Free Initial Consultation
Joshi Law Group is based in San Diego. We offer experienced and convenient estate planning services to clients throughout the area. To take advantage of a free initial consultation about your estate planning needs, call us at 619-822-7566. You can also fill out our online contact form.