The Homestead Exemption in Bankruptcy

When filing for bankruptcy, the homestead exemption protects equity in your residential home. In this article, you'll learn how the homestead exemption works, how to find your homestead exemption amount, and when you'll qualify to use a particular state's homestead exemption.

Read on for details about the homestead exemption, one of the most popular bankruptcy exemptions.

What Is the Homestead Exemption?

The homestead exemption protects or "exempts" equity in the home in which you reside. Almost every state has a homestead exemption you can use to protect your home's equity from creditors in and outside of bankruptcy.

How Do I Use The Homestead Exemption?

You use a homestead exemption the same way you use other bankruptcy exemptions. Bankruptcy exemptions protect some of your property from creditors. You'll list your property and the exemption protecting it in your bankruptcy petition.

Finding the Homestead Exemption Amount for a Chapter 7 or Chapter 13 Bankruptcy

Bankruptcy exemption amounts vary by state, so the amount of home equity you can protect will depend on where you live. Also, your state might allow you to use the federal exemption system. If you're given a choice, select your list carefully. You're limited to the exemptions in the list you choose.

Below you'll find links to state-specific homestead exemption articles. If your state doesn't appear in the first list, you'll find your state's homestead exemption statute and a link to the state's online statutes in the next chart

Exemptions change periodically. These 2021 figures are not being updated. You can meet with a bankruptcy attorney to learn current amounts and how exemptions apply to your situation.

Researching Homestead Exemption Statutes

Most exemption statutes have requirements included in the law and, possibly, the current exemption amount. However, many states don't post exemption increases when the amount changes.

If the homestead exemption in the statute is less than we've posted, don't rely on it. A local bankruptcy attorney can give you the current homestead amount and evaluate whether you qualify to keep your home in bankruptcy.

To find other exemptions in your state and determine whether you can use the federal bankruptcy exemptions, go to Bankruptcy Exemptions by State.

Using the Homestead Exemption in Chapters 7 and 13

A Chapter 7 trustee will sell your home and distribute the proceeds to creditors if you can't protect all the home's equity. In Chapter 13, you can pay creditors an amount equal to your nonexempt equity through the three- to five-year Chapter 13 repayment plan and keep the home.

Learn about the other requirements you'll need to meet to keep your house in bankruptcy.

Special Issues to Watch For With Homestead Exemptions

All exemptions have exclusions or "fine print" that restrict use. We explain some of the rules you should be aware of below. Your local bankruptcy lawyer can explain how they might apply in your case. Also, the bankruptcy chapter you file will determine what will happen to your home if you can't protect all of the equity. You'll find more information about these issues below.

Your Mortgage Must Be Current in Chapter 7 Bankruptcy

Although it's possible to strike up an agreement with your mortgage lender to bring your overdue mortgage current in Chapter 7, the lender doesn't have to work with you, and many won't. To ensure you don't lose your house in Chapter 7, you'll want to be current on your mortgage, be able to protect all equity with a homestead exemption and continue making your payment after bankruptcy.

A Wildcard Exemption Might Help You Protect More Equity

Homestead exemptions aren't always sufficient to protect all of a homeowner's equity. Check whether your state offers a "wildcard exemption" which will allow you to exempt any property of your choosing. The federal exemptions offer a wildcard exemption.

In many instances, you can stack the wildcard exemption on top of your homestead exemption, increasing the total protectable amount. However, some states limit a wildcard's use by precluding real estate or cash.

The Homestead Exemption Domicile Requirement and Ownership Length

Federal law restricts homestead exemptions to prevent people from shielding their assets by moving to states with unlimited homestead exemptions shortly before filing for bankruptcy. You must have purchased your home at least 40 months before bankruptcy before you'll qualify for the state's homestead exemption.

However, an exception exists. If you sold your home and bought a new one with the sale proceeds in the new state, the time you owned your first home will count toward the 40-month requirement.

Suppose you can't satisfy the homestead domicile requirement. In that case, federal law caps your homestead exemption at $189,050 regardless of your state exemption amount (for cases filed between April 1, 2022, and March 31, 2025). (28 U.S.C. 522(p),(q).)

Bankruptcy Fraud and Other Crimes

Your homestead exemption is also capped at $189,050 if you have committed bankruptcy fraud or other crimes (for cases filed between April 1, 2022, and March 31, 2025). (28 U.S.C. 522(p),(q).) Learn more about bankruptcy fraud and the consequences of bankruptcy fraud.

Need More Bankruptcy Help?

Did you know Nolo has made the law easy for over fifty years? It's true—and we want to ensure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.