Most states have a homestead exemption. But most states also have a limit on the value of that homestead.
Sure, you shouldn't lose your reasonable family home over debt. But that doesn't mean people like OJ Simpson should be able to keep their multi million dollar estates even though they have filed for bankruptcy.
It's a little more complicated than that and it's also $100k for married couples and goes up if you are elderly.
In order for a creditor to take a lien on your home after a bankruptcy proceeding in CA, I believe they need to prove that after a Sheriff's sale (which generally does not get market value), there will be more than the exemption limit left over after all the mortgage and taxes and fees are paid.
If they can't then they won't be able to levy your home and force a sale. So in a worst case scenario, you would need to take out an additional mortgage or heloc on the available equity in your home to bring the total available equity under the exemption limit ($75k+) and then pay that money towards the bankruptcy debt.
So basically what is happening, is you get to keep your home, but you are forfeiting all you home owner's equity that exceeds the exemption limit.
Sure, you shouldn't lose your reasonable family home over debt. But that doesn't mean people like OJ Simpson should be able to keep their multi million dollar estates even though they have filed for bankruptcy.