The federal bankruptcy code defines the debtor’s principal residence as the residential building where the debtor primarily lives. (11 U.S.C. 101(13A).) The building can be a residential home, a condominium, or cooperative unit.
Because the code doesn’t require the residence to be attached to land (real property), detached dwellings are included within the definition, too (as long as the debtor uses it as a principal residence). For instance, the following fall within the statute:
The definition is relevant when determining the amount and type of property that a debtor can protect in bankruptcy.
Under the federal bankruptcy exemptions, a debtor can protect (exempt) up to $23,675 in equity in a principal residence (as of February 2017—the amount will increase on April 1, 2019). This exemption type is known as a homestead exemption.
A handful of states let a bankruptcy filer choose between the federal and state exemptions. If your state requires you to use state exemptions, or if it makes more sense for you to do so (you’ll often be able to protect more using the state homestead exemption), this definition will not apply. You’ll need to review the state definition of a principal residence to ensure that you can protect your particular type of dwelling under the statute.