Your homestead exemption is one of the most important benefits you get when you file for bankruptcy. It protects your residence. In New York, you can protect up to $50,000 of equity in your home, $100,000 if you file together with your spouse.
You usually get to take the homestead exemption if the property is your residence when you file the bankruptcy. Only in extreme circumstances could you lose the benefit of the homestead exemption.
In rare cases, a bankruptcy court may deny a homestead exemption if there is fraudulent conduct or a clear showing of bad faith. Normally, the wrongful conduct must be related to the homestead exemption.
If, for example, you own a $500,000 investment property in addition to your $100,000 residence, but you wrongfully claim in your bankruptcy petition that you live in the $500,000 property, you may lose the right to claim the exemption.
As long as you do not lie or conceal property when you file for bankruptcy, you will not lose your homestead exemption.
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