A common concern many people have when filing bankruptcy is that they will lose their home, but thankfully there is a bankruptcy homestead exemption that may help.
This concern mainly applies to a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, the person can keep their home if they can afford the bankruptcy repayment plan and also their regular mortgage payment. However, your home equity can increase the amount of money a debtor must pay in a Chapter 13 bankruptcy. So let’s look more closely at keeping your home in bankruptcy and how a bankruptcy homestead exemption works.
A bankruptcy exemption protects a debtor’s equity in certain assets. Your property is protected when the equity amount in a property is less than or equal to the bankruptcy exemption. Thus the trustee will not sell your property if this is the case.
The Bankruptcy Code includes federal bankruptcy exemptions. Debtors may claim the federal bankruptcy exemption, including a homestead exemption, in some states. Though, states may opt out of the federal exemptions by enacting state-specific bankruptcy exemptions. States can require debtors that have resided in the state for at least two years to use state bankruptcy exemptions. A few states allow debtors to choose between federal and as well as state exemptions.
For example, we will use the federal bankruptcy exemptions. The federal bankruptcy homestead exemption is currently $25,150 for cases filed on or after April 1, 2019. The government revises these figures every three years to account for inflation.
We built the following bankruptcy homestead exemptions calculator to help you estimate the risk of losing your house. This calculator helps you estimate the risk of the following:
Once you take the calculator, you can then take the Chapter 7 calculator below to estimate whether you qualify and the cost for Chapter 7 bankruptcy.
If a Chapter 7 trustee liquidates your home, the trustee must pay you $25,150 for your homestead exemption. Also, please note a state bankruptcy exemption could be higher. The trustee pays you the exemption after the costs of the sale. The costs of sale include the remaining mortgage amount as well as any closing costs.
Consequently, if the proceeds of sale less your allowed bankruptcy homestead exemption is a negative amount, the Chapter 7 trustee should not liquidate your home. The trustee’s purpose in liquidating your home is to receive funds for the bankruptcy estate. The trustee can then use these funds to pay creditors. Although, if the Chapter 7 trustee does not anticipate receiving any money, then the liquidation will not benefit the creditors. Firstly, the trustee must pay to sell your home. Next, the trustee will provide you with the amount equal to your homestead exemption prior to paying any creditors.
However, how much would Chapter 7 need to receive for the trustee to liquidate your home. That question is a bit more complicated.
There is no simple answer to this question. One of the roles of a Chapter 7 trustee is to represent the interests of your unsecured creditors. Unsecured creditors do not hold a lien on collateral, such as a mortgage or title loan. Therefore, they cannot seize your assets until after they pursue a debt collection lawsuit and obtain a personal judgment against you for the debt you owe. For instance, examples of unsecured debts include credit card bills, medical debts, personal loans, and old utility bills.
A Chapter 7 trustee reviews your property to decide whether to liquidate specific items and also use those funds to pay your unsecured creditors. So if the trustee believes he can receive sufficient funds to distribute to creditors, the trustee may liquidate certain property.
Each Chapter 7 trustee must carefully consider all factors before deciding to sell an asset. Factors may include:
Though if creditors receive a few pennies on the dollar, the trustee may determine that the property is of “inconsequential value”. In this case, the trustee may decide not to liquidate the property.
However, you can never assume that a trustee will abandon (not sell) property just because there is a minimal amount of equity in the property. The Chapter 7 trustee has the discretion to decide when to liquidate the property. Chapter 7 bankruptcy attorneys often know the trustees in their jurisdiction. Meanwhile, attorneys are usually aware of how certain trustees handle cases and which trustees may be more willing to liquidate smaller assets.
A Chapter 13 bankruptcy trustee considers how much money the bankruptcy estate might receive if a Chapter 7 trustee liquidated the home. The Chapter 13 trustee should consider all of the same factors that a Chapter 7 trustee considers when deciding whether to liquidate a home.
However, you may consider that your home is typically sold for a discounted value in bankruptcy. Purchasers may not want to wait for the court to approve the sale. They may also fear that the debtor will save the home at the very last moment. Therefore, bankruptcy sales often result in a lower sales price. However, there is no set formula because markets vary significantly by location and by the current economic climate.
An experienced Chapter 13 bankruptcy attorney generally knows the maximum percentage the Chapter 13 trustees in that jurisdiction allow for calculating the decrease in the home’s value. He/she will often know the difference between a Chapter 7 liquidation home sales to a standard real estate transaction.
Chapter 13 trustees do not liquidate property. Therefore, the Chapter 13 trustee is not going to liquidate your home if your home equity exceeds your bankruptcy exemption. However, you could be required to pay more money to your unsecured creditors through your Chapter 13 bankruptcy plan.
The key is to determine how much money unsecured creditors would have received in a Chapter 7 case. Your Chapter 13 plan must pay unsecured creditors at least as much as they would have received had you filed under Chapter 7. Therefore, if your unsecured creditors are receiving less through the Chapter 13 plan, the trustee may require you to increase the plan payment until unsecured creditors receive at least as much as they would in a hypothetical Chapter 7 liquidation.
For example, let's take the following example of $50,000 is available for unsecured creditors in a hypothetical Chapter 7 liquidation.
You can take the Chapter 13 Calculator that uses the official US bankruptcy forms to help you estimate your Chapter 13 plan payment.
Now, let's go through the homestead exemptions state by state, so you can see what the homestead exemptions are for your state.
The Alabama homestead exemption defines as the following, "Ala. Code 6-10-2 - Real property or mobile home to $15,500 after April 1, 2018; property cannot exceed 160 acres (husband & wife may double)"(Source).
Alaska Stat. § 09.38.010. Principal residence up to $72,900 (joint owners may each claim a portion, but total can’t exceed $72,900)"(Source).
"Ariz. Rev. Stat. § 33-1101A. $150,000 for real property, an apartment, or mobile home you occupy to; sale proceeds exempt 18 months after sale or until new home purchased, whichever occurs first"(Source).
"Ark. Const. art. 4. For married person or head of family: unlimited exemption on real or personal property used as residence to 1/4 acre in city, town, or village, or 80 acres elsewhere; if property is between 1/4�1 acre in city, town, or village, or 80-160 acres elsewhere, additional limit is $2,500; homestead may not exceed 1 acre in city, town, or village, or 160 acres elsewhere (husband & wife may not double)"(Source).
The California Homestead Exemption in 2021 is the GREATER of the following:
New Language as of January 1, 2021: Gavin Newsome signed into law the Assembly Bill CA 1885 that passed on September 18, 2020, the updated language:
704.730. (a) The amount of the homestead exemption is the greater of the following:
(1) The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000).
(2) Three hundred thousand dollars ($300,000).
(b) The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.
Old Language: "Cal. Civ. Proc. Code § 704.730. Real or personal property you occupy including mobile home, boat, stock cooperative, community apartment, planned development, or condo to $75,000 if single & not disabled; $100,000 for families if no other member has a homestead (if only one spouse files, may exempt one-half of amount if home held as community property and all of amount if home held as tenants in common); $175,000 if 65 or older, or physically or mentally disabled; $175,000 if 55 or older, single, & gross annual income under $25,000 or married & gross annual income under $35,000 & creditors seek to force the sale of your home; forced sale proceeds received exempt for 6 months after; separated but married debtor may claim homestead in community property still occupied by other spouse."(Source).
"Colo. Rev. Stat. § 38-41-201. Real property, mobile home, manufactured home, or house trailer you occupy to $75,000; $105,000 if owner, spouse, or dependent is disabled or age 60 or older; sale proceeds exempt 2 years after received"(Source).
"Conn. Gen. Stat. § 52-352b(t). Owner occupied real property, co-op or mobile manufactured home, to $75,000; applies only to claims arising after 1993, but to $125,000 in the case of a money judgment arising out of services provided at a hospital. Husband or wife may double the exemption amount."(Source).
"10 Del Code Ann. § 4914(c)(1). Equity in real property or equity in a manufactured home that is debtor’s principal residence"(Source).
"D.C. Code § 15-501(a)(14) Any property used as a residence or co-op that debtor or debtor’s dependent uses as a residence"(Source).
"Fla. Stat. Ann. §§ 222.01, 222.02, Fla. Const. Art. X, § 4. Real or personal property including mobile or modular home to unlimited value; cannot exceed half acre in municipality or 160 acres elsewhere; boats generally not protected; spouse or child of deceased owner may claim homestead exemption (husband & wife may double). Bankruptcy requires 40 months residency in homestead."(Source).
"Georgia Code Ann. § 44-13-100(a)(1) & (a)(6), 44-13-1. Real or personal property, including co-op, used as residence to $21,500 ($43,000 if married, and the property is solely owned by one spouse); up to $5,000 of unused portion of homestead may be applied to any property."(Source).
"Hawaii Rev. Stat. § 651-92(a). $30,000 for head of household or over 65."(Source).
"Idaho Code § 50-1003. Real property or mobile home to $100,000; sale proceeds exempt for 6 months."(Source).
"I.L.C.S. §§ 5/12-901; 5/12-906. Real or personal property including a farm, lot, & buildings, condo, co-op, or mobile home to $15,000; sale proceeds exempt for 1 year"(Source).
"Ind. Code Ann. § 34-55-10-2(b)(1). Real or personal property used as residence to $19,300. Property held as tenancy by the entirety may be exempt against debts incurred by only one spouse"(Source).
"Iowa Code Ann. § 561.16. Unlimited for 40 acres rural, 1/2 acre urban, homestead retains its prior protection despite annexation."(Source).
"Kan. Stat. Ann. § 60-2301. Unlimited for 160 acres rural or 1 acre urban."(Source).
"Ky. Rev. Stat. Ann. § 427.060 Real or personal property used as residence."(Source).
"La. Rev. Stat. Ann. § 20:1. La. Const. Art. 12:9. Property you occupy to $35,000 (if debt is result of catastrophic or terminal illness or injury, limit is full value of property as of 1 year before filing); cannot exceed 5 acres in city or town, 200 acres elsewhere"(Source).
"14 Me. Rev. Stat. Ann. § 4422(1). Real or personal property (including cooperative) used as residence to $47,500; if debtor has minor dependents in residence, to $95,000; if debtor over age 60 or physically or mentally disabled, $95,000 (joint debtors in this category may double); proceeds of sale exempt for six months."(Source).
"Md. Courts and Judicial Proceedings Code § 11-504. Owner occupied residential property or condo or co-op to $22,975. Property held as tenancy by the entirety is exempt against debts owed by only one spouse"(Source).
"Mass. Gen. L. Ch. 188 §§ 1, 1A. $500,000 and $500,000 for each age 62+ or disabled person. Record a Declaration of Homestead with the county Registry of Deeds."(Source).
"Mich. Comp. Laws Ann. § 600.5451(n). $30,000 / $45,000 if 65+ or disabled. ; property cannot exceed 1 lot in town, village, city, or 40 acres elsewhere; spouse or children of deceased owner may claim homestead exemption."(Source).
"Minn. Rev. Stat. Ann. § 510.02. $390,000 or, if the homestead is used primarily for agricultural purposes, $975,000; cannot exceed 1/2 acre in city, 160 acres elsewhere."(Source).
"Miss. Code Ann. § 85-3-21. $75,000 for 160 acres; sale proceeds exempt. Mobile home (as personal property) to $30,000 (Mobile home does not qualify as homestead unless you own land on which it is located)"(Source).
"Mo. Ann. Stat. § 513.475. Mobile home to $5,000"(Source).
"Mont. Code Ann. § 70-32-104. Real property or mobile home you occupy to $250,000; sale, condemnation, or insurance proceeds exempt for 18 months. Must record homestead declaration before filing for bankruptcy."(Source).
"Neb. Rev. Stat. §§ 40-101 to -108. Limited to head of household; cannot exceed 2 lots in city or village, 160 acres elsewhere; sale proceeds exempt 6 months after sale."(Source).
"Nev. Rev. Stat. § 21.090(1)(l). Real property or mobile home to $550,000. Must record homestead declaration before filing for bankruptcy."(Source).
"N.H. Code Ann. § 480:1. Real property or manufactured housing (and the land it’s on if you own it)."(Source).
"Survivorship interest of a spouse in property held as tenancy by the entirety is exempt from creditors of a single spouse"(Source).
"N.M. Stat. Ann. § 42-10-9. Joint owners may double."(Source).
"N.Y. Civ. Prac. L. and R. § 5206(a). *Real property including co-op, condo, or mobile home, to $165,550 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $131,325 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $82,775 for the remaining counties in the state. Husband and wife may double."(Source).
"N.C. Gen. Stat. § 1C-1601(a)(1). Real or personal property, including co-op, used as residence to $35,000. ($60,000 if 65 or older and spouse is deceased); up to $5,000 of unused portion of homestead may be applied to any property."(Source).
"N.D. Cent. Code §§ 47-18-01, 28-22-02(7). Real property, house trailer, or mobile home."(Source).
"Ohio Rev. Code Ann. § 2329.66(A)(1). Real or personal property used as residence."(Source).
"31 Okla. St. Ann. § 2. Unlimited for 160 acres rural, 1 acre urban. $5,000 limit if more than 25% of total sq. ft. area used for business purposes; okay to rent homestead as long as no other residence is acquired."(Source).
"Or. Rev. Stat § 18.395. Real property, mobile home or houseboat you occupy or intend to occupy to $40,000 ($50,000 for joint owners); property cannot exceed 1 block in town or city or 160 acres elsewhere; sale proceeds exempt 1 year from sale, if you intend to purchase another home."(Source).
"Property held as tenancy by the entirety may be exempt against debts owed by only one spouse."(Source).
"R.I. Gen. Laws § 9-26-4.1. Land & buildings you occupy or intend to occupy as a principal residence"(Source).
"S.C. Code Ann. § 15-41-30(1). Real property, including co-op."(Source).
"S.D. Cod. Laws § 43-45-3. Unlimited for 160 acres rural, 1 acre urban. Real property to unlimited value or mobile home (larger than 240 sq. ft. at its base and registered in state at least 6 months before filing) to unlimited value; sale proceeds to $30,000 ($170,000 if over age 70 or widow or widower who hasn’t remarried) exempt for 1 year after sale"(Source).
"Tenn. Code Ann. § 26-2-301. $7,500 unmarried / $12,500 unmarried 62+ / $20,000 married and one spouse 62+ / $25,000 married and both spouses 62+"(Source).
"Tex. Const. Art. XVI, §§ 50, 51; Tex. Prop. Code §§ 41.001 to 002. Unlimited for 100 acres rural (single) / 200 acres rural (family), 1 acre urban. sale proceeds exempt for 6 months after sale (renting okay if another home not acquired, Prop. 41.003). Must file homestead declaration, or court will file it for you for a fee. Due to Enron executives keeping multi-million dollar mansions, those convicted of securities violations are capped at $125,000."(Source).
"Utah Code Ann. § 78-23-3. Real property, mobile home, or water rights to $30,000 if primary residence; $5,000 if not primary residence"(Source).
"12 Vt. Stat. Ann. § 2740(19)(D). Real property or mobile home. May also claim rents, issues, profits, & out-buildings"(Source).
"Va. Code Ann. § 34-4. Must file homestead declaration before filing for bankruptcy. $5,000 plus $500 per dependent; rents & profits; sale proceeds exempt to $5,000 (husband & wife may double, unused portion of homestead may be applied to any personal property); if 65 or older, exemption is $10,000"(Source).
"Wash. Rev. Code § 6.13.030. Real property, manufactured home, or mobile home; unimproved property intended for residence to $15,000."(Source).
"W. Va. Code § 38-10-4(a). Real or personal property used as residence; unused portion of homestead may be applied to any property."(Source).
"Wisc. Stat. § 815.20. Property you occupy or intend to occupy; sale proceeds exempt for 2 years if you intend to purchase another home."(Source).
"Wy. Stat. Ann. § 1-20-101. Real property or house trailer you occupy."(Source).
An experienced bankruptcy lawyer bankruptcy calculator to help the attorney understand your situation and request for an attorney to reach out to you directly. A bankruptcy lawyer understands how to apply bankruptcy exemptions to maximize the protection of your home. Also, an attorney understands how to minimize the value of a home to reduce the potential equity for the bankruptcy estate.
Please contact Ascend if you have questions about filing bankruptcy. We can help you find a bankruptcy lawyer or provide additional information about bankruptcy options. Call or text us at 833-272-3631 to speak with a representative.
