CA State Sen. Bob Wieckowski Proposes Home Equity Bankruptcy Protection Bill

California State Sen. Bob Wieckowski has proposed a new law to increase the homestead exemption.

The exemption allows debtors filing for bankruptcy to preserve some equity in their homes. Lawmakers originally intended for the measure to prevent homelessness in those cases. While housing prices have grown tremendously in the Bay Area and across California since that time, the amount that could be exempted has remained the same since the '70s. SB 308 would raise protection levels.

The original law passed in 1975 and covered the median price of a home at that time. It was seen as a way to preserve a tangible asset (real estate) from seizure and allow a homeowner to start again. Sen. Wieckowski believes the original law is no longer adequate. “With the median sales price of a Bay Area single-family home at $832,800, homeowners need the added protection SB 308 will provide,” he said.

Current law allows an exemption of $75k for single residents, $100k for couples and $175k for the elderly or disabled. SB 308 will raise these exemptions to $100K for single residents, $150K for couples and $300K for seniors.  If the bill passes, California will join several other states that have increased the homestead exemption.

“By adjusting the homestead exemptions to allow Californians in financial distress to exempt more of their home equity from creditors, the bill improves their financial security and reduces the likelihood that they will lose their home through a forced sale,” Wieckowski added.

The California Banker's Association, a trade group representing the interests of the state's banks, is opposed to the measure.  It did not return a request for comment.  

SB 308 has had a fitful journey in Sacramento. It failed to pass during the last legislative session during the Assembly's floor vote and was left inactive.  The measure is being taken up again this session.