Most people who file Chapter 7 in California keep their house. The state’s homestead exemption protects between $371,547 and $743,459 of home equity for cases filed in 2026, which is one of the strongest protections in the country. Whether you actually keep the home comes down to three things: how much equity you have, which of California’s two exemption systems you choose, and whether you keep paying the mortgage.1California Legislative Information. California Code of Civil Procedure CCP 704-730
Start With Your Equity
Equity is what the home is worth minus what you owe on it. If the house would sell for $700,000 and you still owe $500,000 across all mortgages and liens, your equity is $200,000. That number is what the Chapter 7 trustee looks at, because the trustee’s job is to find assets worth selling to pay creditors.2United States Courts. Chapter 7 – Bankruptcy Basics
How the home gets valued matters when your equity sits close to the exemption limit. Some courts use full fair market value; others use a lower figure that reflects a forced sale. If you’re near the line, pay for an independent appraisal rather than trusting an online estimate. A residential appraisal in California generally runs $300 to $600.
How Much Equity California Protects
California’s homestead exemption, in 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 exemption equals the median sale price of a single-family home in your county during the prior calendar year, bounded by that floor and cap.1California Legislative Information. California Code of Civil Procedure CCP 704-730
For 2026, the floor is $371,547 and the cap is $743,459. Expensive counties like San Francisco and Santa Clara put most homeowners at or near the cap. In less expensive inland counties, the floor still shields a serious amount of equity.
If your equity is at or below your county’s figure, the trustee cannot sell the house. $300,000 in equity against a $371,547 floor, for example, is fully protected. The property has to be your primary residence on the filing date. Investment properties and second homes do not qualify.
Pick the Right Exemption System
California gives filers a choice between two separate sets of exemptions, and you have to pick one. You cannot mix them.
System 1 uses the CCP 704 exemptions, including the large homestead exemption described above. If you own a home with meaningful equity, this is almost always the right choice.
System 2 uses CCP 703.140 and offers a homestead exemption of roughly $30,000, a small fraction of System 1. It makes up for that with a generous wildcard exemption that can be applied to any kind of property. Renters and homeowners with little or no equity usually come out ahead under System 2 because they can shield more cash, vehicles, and personal property.
The mistake to avoid is picking System 2 when you have real home equity. That error can leave hundreds of thousands of dollars exposed to the trustee.
Residency and Recent-Purchase Rules
Two federal rules can cut into the California exemption even if the equity math would otherwise work in your favor.
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 before filing to use California’s exemptions. Move here more recently than that and you may be stuck with your prior state’s exemptions, which could be far less generous.3Office of the Law Revision Counsel. 11 USC 522 Exemptions
The second targets recently acquired equity. If you bought the home or added equity to it within 1,215 days (about three years and four months) before filing, the homestead exemption on that newly acquired interest is capped at $214,000 under 11 U.S.C. § 522(p)(1), no matter what California law would otherwise allow. The rule exists to stop people from pouring cash into a house right before filing to hide it from creditors.
The Mortgage Keeps Running
A full homestead exemption protects the equity. It does not pay the mortgage. A Chapter 7 discharge wipes out your personal liability for the mortgage debt, so the lender can never sue you for a deficiency, but the lien on the house survives the bankruptcy. Stop paying and the lender can still foreclose.4United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
You have two ways to keep the house after discharge:
- Keep paying without signing anything new. Many California homeowners simply continue making their mortgage payments through and after bankruptcy. This is sometimes called a ride-through. You stay as long as you pay, and you are not personally on the hook if you later decide to walk away. Whether this is available depends on your lender and the specifics of your case.
- Sign a reaffirmation agreement. This is a new contract putting you personally back on the loan. If you later default, the lender can foreclose and still come after you for any remaining balance. You can cancel a reaffirmation up to 60 days after it is filed with the court, or before your discharge is entered, whichever is later.5Office of the Law Revision Counsel. 11 US Code 524 – Effect of Discharge
Most California bankruptcy attorneys recommend against reaffirming a mortgage when a ride-through is available. Reaffirmation gives up one of Chapter 7’s main benefits and leaves you exposed if the home loses value or your finances slip again later.
When Filing Does Not Rescue a Behind-On-Payments Mortgage
Filing a bankruptcy petition triggers an automatic stay under 11 U.S.C. § 362, which halts foreclosure proceedings, lawsuits, and other collection activity the moment the case is opened.6Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay The stay is not a permanent fix. If you are behind on the mortgage, the lender can ask the court to lift the stay and restart foreclosure, and courts routinely grant those requests when the debtor is not making payments. Chapter 7 has no mechanism for curing missed mortgage payments over time.
When Your Equity Is Over the Limit
If your equity clearly exceeds your county’s homestead exemption, the trustee has authority to sell the house. When that happens, mortgages and other liens are paid first, you get the full cash value of your homestead exemption, sale costs and the trustee’s commission come next, and anything left goes to unsecured creditors.
Trustees do not sell unless the math works. If selling would leave little or nothing for unsecured creditors after costs and your exemption payout, the trustee will often abandon the property. Most Chapter 7 cases turn out to be no-asset cases where nothing gets sold at all.2United States Courts. Chapter 7 – Bankruptcy Basics
If the numbers do not work in your favor, Chapter 13 is usually the way to keep the house. Chapter 13 has no liquidation. You propose a repayment plan running three to five years and keep your property. The plan payments have to account for the non-exempt equity: if you have $100,000 in equity above the exemption, unsecured creditors must receive at least that much through the plan. Chapter 13 also lets you catch up on missed mortgage payments through the plan, which Chapter 7 cannot do. For a homeowner with steady income who is behind on the mortgage or sitting on too much equity, it is often the only realistic path to keeping the house.