Hello, I’m Gary Fraley. I’m a California State Bar Certified Bankruptcy Law Specialist in Sacramento
California.
Some times when people file a bankruptcy there is too much equity in the home. Equity is the difference
between what your home is worth and what is owed on it. If there is enough equity, a bankruptcy
trustee can sell the home and set aside the amount of your exempt equity in the home. Now that
sounds great if that was what you expected. Okay, if the trustee sells my home I get my $75,000
$100,000 or $175,000 handed to me right? Not really.
In California once that home is sold you have 180 days to close escrow on another home and move into
your new residence. Now days what are you going to get for $75,000 or a $100,000 or even $175,000?
So, when the 180 days runs, on day 181 days that money loses its protection.
That homestead exemption is lost back to the day the bankruptcy was filed. Now the trustee not only
got the money above that exempt amount, but the trustee gets to say thank you I’ll take that as well to
pay your creditors. So it is very important to know the value and know the equity in the home. You want
to get your home out of the bankruptcy estate if possible. No matter what, you need to be aware there
is this land mine. Thank you state legislature on that one.
I hope this helps. Hopefully you understand and use this information to be aware of where that land
mine is.
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