What should I know about the bankruptcy homestead exemption laws before I file for bankruptcy?

Federal homestead exemption and state homestead exemption laws are put in place to help homeowners protect their real estate investments up to a certain level. When filing Chapter 7 bankruptcy, all debt is discharged while all excessive assets are sold and the funds are used to repay creditors. However, bankruptcy laws not only allow creditors to receive excessive assets, but they are designed to offer the homeowner the best possible chance at a solid financial future. Keeping their home may be an option.

Understanding Homestead Exemptions

There are many aspects of homestead exemptions that are critical to understand. First, realize that many states allow individuals to choose between a set of exemptions offered by the state or those offered by the federal court. In California, there are two sets of exemptions individuals can select from when filing. Choose the set of exemptions that best provides for your situation.

• Bankruptcy exemptions usually provide protection of a home up to a certain value of equity. Equity is the remaining balance after you subtract the value of the home’s mortgage from the value of the home.
• Homestead exemptions may not stop foreclosure. If you are behind on your debt, you will need to get caught up to remain in your home.
• Exemption values will change from year to year, or when bankruptcy code is updated.

Hiring an Attorney

Hire an attorney to help you to decide between state and federal homestead exemption options. An attorney can also offer other recommendations for protecting your home from bankruptcy’s seizure.