Your house – the place where you have lived in the past and plan to live in again – may not be your residence when you file a bankruptcy petition. Does it matter? In several ways it might matter a great deal.
It may be that when you filed your bankruptcy petition you listed your address as where you lived at the time you filed, which was someplace other than your house address. This might come up in a variety of situations:
*You have separated from your spouse. You have left the home, but plan to return just as soon as your spouse leaves. Or you are in a trial separation and have decided to live apart for a while and then try to reconcile.
*You have been forced to leave the home for a while – military deployment, or have taken a temporary job in another city.
*Your home has been flooded or damaged in a fire and is unlivable until it is fully repaired.
*You left your home because it was in foreclosure, but now have filed a Chapter 13 bankruptcy case to stop the foreclosure and save the house, and will be moving back in soon.
*You couldn’t afford the mortgage payments so you rented out the house and moved into a rental apartment. Now you have found a better paying job and plan on moving back to the house as soon as the tenants lease is over.
The important question is going to be – even though you did not live in the house when you filed your bankruptcy, can you still call it your “residence”. This leads to the next, all important question – can you take a homestead exemption in the property?
The homestead exemption allows you to protect some or all of the equity you have in the property. Your equity is the difference between what the home is worth and what you owe on it. The homestead exemption is only available to protect the equity in your “residence”. So if it is not your residence, you cannot protect the equity.
If there are any judgments against you when you file your bankruptcy petition, those judgments will have attached as liens against the property. If the judgment liens are against your “residence”, you can make a motion in bankruptcy court to remove them if they impair the homestead exemption. If the property is not your residence, you cannot remove the judgment liens.
What if a married, but separated couple, with judgments against each of them, file a joint bankruptcy petition, but at the time only one lived in the home? It may be that only the spouse living in the home at the time of the filing can successfully remove his/her judgment liens against the property, but the spouse living elsewhere, cannot remove the liens against him/her. But maybe, if the non residing spouse plans to move back in, he/she can still claim it as their residence. If that is the case, he/she can protect their portion of the equity in the home, and can remove any liens in their name against the house.
If you think this situation may apply to you, be sure to fully discuss it with your bankruptcy attorney.