If you own a home when filing bankruptcy, California's homestead exemption provides significant protection for your primary residence and equity.
California Homestead Exemption Protection
California's homestead exemption protects up to $75,000 of home equity from creditor claims in bankruptcy (amounts vary by county and household size, with higher exemptions for seniors). Your home is typically considered a protected asset that you can keep through bankruptcy. This is a major advantage of filing in California versus other states with lower exemption amounts. If your home equity falls below the exemption limit, creditors cannot force a sale.
Chapter 7 and Your Home
In Chapter 7 bankruptcy, if your equity is protected by the homestead exemption, you keep your home as long as you continue making mortgage payments and property tax payments. The mortgage itself isn't eliminated—that obligation persists. Only unsecured debts like credit cards and medical bills are discharged. Chapter 7 never forces a homeowner to sell their residence if equity is protected.
Chapter 13 and Mortgage Modification
Chapter 13 bankruptcy can actually save your home if you're behind on mortgage payments. The repayment plan includes catching up on missed payments over 3-5 years. This is powerful protection against foreclosure. Additionally, Chapter 13 allows modification of second mortgages or home equity lines of credit under certain circumstances, potentially eliminating debt while keeping your home.