Some people have been unable to use bankruptcy to get out of debt because they have too much equity, usually in their homes, but sometimes in other assets. SB 308 is a bill in the California legislature that will increase the amount of exemptions for things like your home. SB 308 has two major provisions. SB 308 passed the California Senate last year, only to be blocked in the Assembly once the banks started pressuring the legislators. SB 308 has been reintroduced as a more modest bill this year.
The first benefit of SB 308 is a slight increase to the homestead exemption. The current exemption is $75,000 for individuals; $100,000 for married couples; and $175,000 if the debtor is age 65 or older, is disabled, or is on a limited income. SB 308 would increase those exemptions to $100,000, $150,000, and $300,000 respectively. The homestead exemption in last year’s version would have been $300,000 for everyone, but as explained above, the banks prevented that bill from passing last session.
SB 308’s second benefit is that it would eliminate the current requirement that debtors who use the homestead exemption reinvest the exemption money in another home. This harsh requirement has prevented many people from filing chapter 7 bankruptcy, because a chapter 7 trustee would take back the exemption money if it were not reinvested in another home.
Contact your California Senators and Assemblypersons and tell them that you strongly support SB 308 and that you would like even stronger protections for people in need of financial help. If the legislators get enough pressure from voters, it can and probably will override the pressure they are sure to get from the banks. People in financial distress should be able to use bankruptcy to get out of debt and should not be prevented from doing so just because their homes — which they cannot sell because they have to live there — are worth a lot more than what they owe on them.