How Much Equity Can a Debtor Have in Their Home and Still File for Chapter 7 Bankruptcy?

How Much Home Equity Can a Debtor Exempt in California Bankruptcy?

As California bankruptcy attorneys, we are often asked how much equity a debtor can have in their home and still file for Chapter 7 bankruptcy? The answer is simple: anyone can file for bankruptcy, but it may not be wise to if the debtor’s exemptions do not cover their assets, also known as having exposed assets. These assets are exposed because they the Chapter 7 Trustee can sell your house to derive a benefit for creditors.

The California homestead exemption starting 2021 is as high as $600,000 or as low as $300,000, depending on the median home price in the debtor’s county. To determine how much equity a debtor can have in their house while obtaining a Chapter 7 discharge without paying anything to the Chapter 7 trustee, follow these steps:

  1. Determine the fair market value of the property. Note that properties in bankruptcy generally sell for about 95% to 98% of the fair market value in an ordinary market transaction, so there isn’t much of a discount to be applied.
  2. Subtract the costs of sale. While these may be around 7% in an ordinary market transaction, the cost may be closer to 8 to 10% in a bankruptcy sale given the fees of the trustee’s attorney.
  3. Subtract any debt on the property, such as the first mortgage, second mortgage (if any), judgments, unpaid taxes, and any other liens. Note that trustees sometimes try to make a deal with junior lienholders by taking a carve-out of what they are owed to sell otherwise underwater properties, so there is no guarantee that this calculation will result in the debtor walking out of bankruptcy without ramifications.
  4. Subtract the homestead exemption in California.

If the result is a positive figure, this is the exposed equity that the debtor may need to pay to the trustee to keep their home in a Chapter 7. If the result is negative, the odds are in favor of the debtor that the bankruptcy will be a “no asset” bankruptcy. Even further, debtors may be able to take advantage of the laws on transferring except property without being subject to fraudulent transfer laws.

It is important to carefully consider all options in consultation with an experienced bankruptcy attorney who is skilled in real estate law to obtain the optimal result.

About Scott Talkov

Scott Talkov is a partition lawyer in California. He founded Talkov Law Corp. after more than one decade of experience at a California real estate litigation firm, where he served as one of the firm's partners. He has been featured on ABC 7, CNN, KCBS, and KCAL-9, and in the Los Angeles Times, the Orange County Register, the San Diego Union-Tribune, the Press-Enterprise, and in Los Angeles Lawyer Magazine. Scott has been named a Super Lawyers Rising Star for 9 consecutive years. He can be reached about new matters at or (844) 4-TALKOV (825568). He can also be contacted directly at

Talkov Law is Rated 5 out of 5 stars based on 103 customer reviews.

Contact Us Today for a Free Consultation & Pay No Retainer

Call Talkov Law to discuss having your legal fees paid from the proceeds of sale of your property and no money down

Awards and Recognition

US News and World Report Scott Talkov

We Have Been Featured On:

The Real Deal

Recent Blog Posts

Offices Throughout California

Los Angeles Office
10880 Wilshire Blvd Ste 1101
Los Angeles, CA 90024
Phone: (310) 496-3300

Orange County Office
4000 MacArthur Blvd Ste 655
Newport Beach, CA 92660
Phone: (949) 888-8800

San Jose Office
99 S. Almaden Blvd Suite 600
San Jose, CA 95113
Phone: (408) 777-6800

San Diego Office
11622 El Camino Real Ste 100
San Diego, CA 92130
Phone: (858) 800-3300

San Francisco Office
50 California St, Ste 1500
San Francisco, CA 94111
Phone: (415) 966-3300

Riverside Office
3610 Central Ave, Ste 400
Riverside, CA 92506
Phone: (951) 888-3300

Sacramento Office
500 Capitol Mall, Suite 2350
Sacramento, CA 95814
Phone: (916) 668-3300

The information on this site, including the Talkov Law Blog, is intended for general information purposes only. By using this site, you agree that any information contained in the site does not constitute legal, financial or any other form of professional advice. Information on this site may be changed without notice and is not guaranteed to be complete, accurate, correct or up-to-date.