Most people who file Chapter 7 bankruptcy in California keep their house. The state’s homestead exemption shields between $371,547 and $743,459 of home equity in 2026, which is enough to cover the equity most homeowners actually have. Whether you keep your house comes down to three questions: how much equity is in the home, whether you claim the right set of exemptions, and whether you keep paying the mortgage.
The Equity Number Is What Matters
Equity is your home’s fair market value minus everything you owe against it — mortgages, HELOCs, judgment liens, tax liens. If the house is worth $700,000 and the loans total $500,000, you have $200,000 in equity. That figure is what the Chapter 7 trustee looks at, because the trustee’s job is to find assets worth selling to pay creditors.1United States Courts. Chapter 7 – Bankruptcy Basics
How the home gets valued can swing the outcome. Some courts use full fair market value; others use a lower figure reflecting a forced sale. When your equity sits near the exemption limit, that difference decides the case, and paying for an independent residential appraisal (typically $300 to $600 in California) is worth more than any online estimate.
How Much Equity California’s Homestead Exemption Protects
California Code of Civil Procedure Section 704.730 protects a dollar amount of equity in your principal residence. The statute sets a floor and a cap that both adjust each year for inflation. Your specific exemption depends on the median sale price of a single-family home in your county during the prior calendar year: if that median is above the adjusted floor, you get a higher figure, up to the cap.2California Legislative Information. California Code of Civil Procedure CCP 704-730
For 2026, the floor is $371,547 and the cap is $743,459. In San Francisco, Santa Clara, and other high-cost counties, most homeowners qualify at or near the cap. In more affordable counties, the floor still provides serious protection.
If your equity is at or below your county’s applicable amount, the trustee cannot sell the house. The property has to be your principal residence when you file. Vacation homes and rental properties don’t qualify.
Pick the Right Exemption System
California gives filers two entirely separate exemption sets, and you have to choose one. You can’t combine them.
System 1 is the CCP 704 set, which includes the large homestead exemption above. For anyone with meaningful equity in a home, this is almost always the right choice.2California Legislative Information. California Code of Civil Procedure CCP 704-730
System 2 (CCP 703.140) has a homestead exemption of roughly $30,000, but it includes a large wildcard exemption you can apply to any property. Renters and homeowners with little equity often do better with System 2. For a homeowner with real equity, picking System 2 by mistake leaves hundreds of thousands of dollars exposed to the trustee.
Residency and Recent-Purchase Limits
Two federal rules can cut your California homestead exemption down even when the state number would otherwise protect you.
The first is a residency rule under 11 U.S.C. § 522(b)(3). You must have been domiciled in California for at least 730 days (about two years) before filing to use California’s exemptions. If you moved here more recently, you may be stuck with your prior state’s exemptions, which are often far weaker.3Office of the Law Revision Counsel. 11 USC 522 Exemptions
The second is a cap on recently acquired equity. Under 11 U.S.C. § 522(p)(1), if you bought your home or added equity within 1,215 days (about three years and four months) before filing, the exemption on that new interest is capped at $214,000, no matter what state law says. The rule exists to stop people from dumping cash into a house right before filing.3Office of the Law Revision Counsel. 11 USC 522 Exemptions
You Still Have to Pay the Mortgage
Even when the homestead exemption fully covers your equity, keeping the house means staying current on the loan. A Chapter 7 discharge eliminates your personal liability on the mortgage debt, so the lender can’t sue you for a deficiency. It does not touch the lender’s lien on the property.4United States Courts. Discharge in Bankruptcy – Bankruptcy Basics If you stop paying after bankruptcy, the lender can still foreclose.
Filing does trigger the automatic stay, which immediately halts pending foreclosure and other collection activity.5Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay That’s temporary. If you’re behind, the lender can ask the court to lift the stay and resume foreclosure, and courts routinely grant those motions when payments aren’t being made. Chapter 7 doesn’t give you a way to catch up on missed payments.
Homeowners who are current have two ways to keep the house going forward:
- Continue paying without signing anything new. Sometimes called a “ride-through,” this keeps you in the home as long as you pay, without restoring personal liability. If you later need to walk away, you can. Availability depends on the lender and the specifics of your case.
- Sign a reaffirmation agreement. This is a new contract that puts you back on the hook personally. You can cancel it up to 60 days after it’s filed with the court or before discharge is entered, whichever is later.6Office of the Law Revision Counsel. 11 US Code 524 – Effect of Discharge
Most California bankruptcy attorneys advise against reaffirming a mortgage when the ride-through option is available. Reaffirming gives up one of the main benefits of Chapter 7 and adds risk if the home loses value or your finances slip again.
When Your Equity Is Too High
If your equity exceeds the applicable homestead exemption, the trustee has authority to sell the house. That doesn’t mean it will happen automatically. The trustee only proceeds when a sale would produce meaningful money for unsecured creditors after paying off the mortgages, paying you your full exemption in cash, and covering the sale costs and trustee commission.
When the numbers are close, the trustee often abandons the property. Most Chapter 7 cases are “no-asset” cases where nothing gets sold.1United States Courts. Chapter 7 – Bankruptcy Basics The closer your equity is to the exemption, the more the appraisal fight matters.
When Chapter 13 Is the Better Way to Keep the House
If your non-exempt equity is clearly too large to survive Chapter 7, Chapter 13 is usually the answer. Chapter 13 doesn’t liquidate anything. You propose a three-to-five-year repayment plan and keep all your property.
The trade-off is that your plan has to pay unsecured creditors at least the value of the non-exempt equity. If you have $100,000 of equity above the exemption, that’s roughly the minimum your unsecured creditors have to receive through the plan. Monthly payments can be substantial, but for a homeowner with steady income, Chapter 13 is often the only realistic way to keep the house.
Chapter 13 also lets you cure missed mortgage payments over the life of the plan, which Chapter 7 cannot do. If you’re behind and facing foreclosure, that alone is often the deciding factor.
What Filing Costs
The court filing fee for Chapter 7 is $338. Attorney fees for a California Chapter 7 case with real property involved typically run $1,200 to $2,500 depending on complexity. Budget a few hundred more for an independent appraisal if your equity is anywhere near the exemption line.
Courts can allow you to pay the filing fee in installments, and fee waivers are available if your household income is below 150% of the federal poverty guidelines.