It’s not news that it is tougher to buy a home in the U.S. than it was 40 years ago. But what may come as a surprise to the roughly 7. 7 million Californians financially secure enough to own their homes is how the state’s inadequate and loophole-riddled bankruptcy protections too often make it impossible to hold onto that piece of the American Dream, just when it’s needed most. The problem lies with the law’s “homestead exemption,” a provision intended to shield a core amount of a bankrupt debtor’s home equity, when a court forces the sale of the house, in order to allow that debtor to land on their feet with a roof over their head and start afresh.
When Congress enacted the 1978 federal bankruptcy code, which is the basis for California’s and the other 49 states’ widely varying laws, the state’s homestead exemption was set at $40,000. Back in 1975,