Bankruptcy

Homestead Bankruptcy Exemptions – What Happens to Your Home when You Go Bankrupt?

The legal provisions applicable to homestead bankruptcy exemptions vary from one state to another. Though the federal laws apply everywhere in the United States of America, states are also allowed to have their own rules and regulations. If you are considering filing a petition to be declared as bankrupt so that you could get rid of your debts and start your financial life afresh, you must know whether you will be able to keep your home or not after the final judgment comes from court that declares you bankrupt. In states that have no provisions homestead exemptions, you will be required to file a declaration of homestead while filing your petition.

States Where the Exemptions are Based on Equity and Lot Size

Oregon, Nebraska, Mississippi, Minnesota, Michigan, Louisiana, Hawaii, and Alabama are the states where bankruptcy exemptions related to your home or residential property are determined on the basis of lot size and equity.

States Where the Exemptions are Based on Lot Size

The states where only lot size is considered when it comes to determining the value of homestead properties to be exempted include Texas, South Dakota, Oklahoma, Kansas, Iowa, Florida, and Arkansas.

States Where the Exemptions are Based on Equity

There is a very long list of states that fall under this category – Wyoming, Wisconsin, West Virginia, Washington, Virginia, Vermont, Utah, Tennessee, South Carolina, Rhode Island, Ohio, North Dakota, North Carolina, New York, New Mexico, New Hampshire, Nevada, Montana, Missouri, Massachusetts, Maine, Kentucky, Indiana, Illinois, Idaho, Georgia, Connecticut, Colorado, California, Arizona, and Alaska.

States that do Not Allow Debtors to Get Their Homes or Residential Properties Exempted

There are four states that do not allow any homestead bankruptcy exemptions. These states are Pennsylvania, New Jersey, Maryland, and Delaware.

Unlimited Exemption

The District of Columbia is the only place in the United States of America that allow the debtors to keep their home or residential properties, irrespective of the value of the properties. There is no upper limit.

What Federal Laws have to Say?

As per the legal provisions made under federal laws, you are allowed to keep up to $21,625 worth of equity in your home. The overall value in home and residential properties that can be exempted is $125,000 for properties that you have acquired within the last 1215 day days (3 years and 4 months).

You have the options to go for the federal homestead bankruptcy exemptions, but if you want to take advantage of the state laws, you will have to first figure out which state laws are applicable in your case. In general, if you have been living in state for the last 24 months, the laws applicable in that state will apply to you. However, if you have been shifting from one state to another in these 24 months, the state applicable to you is the one where the majority of the 6 months preceding the 2 year period.


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One Response to “Homestead Bankruptcy Exemptions – What Happens to Your Home when You Go Bankrupt?”

  1. robert says:

    Very interesting– what happens to your home when you go bankrupt? Declaration of the court as bankrupt seems to give a fear in the mind of loosing everything. But it is not true actually there are many exemptions. Court is going to provide you. The exceptions can differ from one state to other. If you are living in a state where homestead exemptions are not present you have to file a declaration of homestead at the time of filing your petition of Bankruptcy. Every state has its own provision for considering the exemptions. Some states exempt the property on the basis of equity and lot size while the others exempt on the basis of equity or on the lot size. In such states, the property will be exempted on such facts; while there are four states like New Jersey they do not exempt the residential property. Columbia is the place where the residential property is totally exempted. There is no upper limit of the value of properties. If any individual does not want to go with state laws they can be made the declaration under Federal laws. It is always good to consult a good legal expertise before taking any decision.

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