Most people want to know whether they can keep valuable property before filing for bankruptcy—especially a home. If you qualify to use the Oklahoma homestead exemption, you'll likely be able to protect all of the equity in your house. In this article, we explain:
For more information, read How to File Bankruptcy in Oklahoma. Not only will you find answers, but it includes helpful checklists and a link to an interactive bankruptcy quiz. Or, try the start-to-finish bankruptcy guide, What You Need to Know to File for Bankruptcy.
Some states allow bankruptcy filers to use the federal bankruptcy exemption system instead of the state system. Although Oklahoma isn't one of these states, it has one of the most generous homestead exemptions in the country. You can exempt an unlimited amount of equity in your home, manufactured home if it's your primary residence, or other property covered by the homestead exemption. But, the homestead can't be larger than half an acre in a municipality or 160 acres elsewhere.
Because Oklahoma's homestead exemption is so generous, you'll have to own the property for at least 1,215 days before the bankruptcy filing. Otherwise, federal law will limit the homestead exemption amount. Find out how this requirement prevents debtors from "shopping" for the most favorable homestead exemptions and the current amount of the federal cap.
Finally, watch for another tricky rule. Suppose you use more than 25% of the total square footage of your property for business purposes. In that case, your exemption will be limited to $5,000. You can, however, rent your property and still claim the total exemption amount, as long as you don't live in another residence. (31 O.S. § 1.)
In Oklahoma, the homestead exemption is automatic—you don't have to file a homestead declaration to claim the homestead exemption in bankruptcy. However, depending on the bankruptcy chapter you file, you'll need to meet other requirements to prevent losing your home. Find out more by reading either Your Home in Chapter 7 or Your Home in Chapter 13.
The Oklahoma exemption laws will not protect your property in certain instances. Specifically, it will still be at risk from clerk, mechanic, laborer, or servant wage claims, mechanics' liens, and tax liability. Also, non-residents of Oklahoma, debtors in the act of removing their families from the state, or those who have absconded with their family can't use this exemption. (31 O.S. §§ 5, 6).
Use the "search laws" function at the bottom Oklahoma legislature's website to view the statute. Finding the correct information can be challenging, so if you can't independently verify your exemptions, consider consulting with an Oklahoma bankruptcy attorney.
This overview cannot provide all of the information you'll need to file a bankruptcy case. For more detailed information, consider buying a self-help book such as How to File Chapter 7 Bankruptcy by Attorney Cara O'Neill and Albin Renauer J.D.
Updated July 7, 2021