20 Jul Is My House Safe from Creditors in Connecticut?
A main feature of the bankruptcy law is the concept of exemptions. This is a list of the types and amounts of property that you are allowed to keep safe from seizure by your creditors. There are many articles on this site that deal with this topic. Enter the word ‘exemption’ in the search box on this site and you will find a number of articles.
Some states have exemption laws in addition to the federal law. Certain states opt out of the federal laws and other states have no exemptions for certain kins of property.
Connecticut has its own twist to this subject when it comes to real estate. Until October 1, 1993, Connecticut did not have a homestead exemption. This meant that absent a Bankruptcy under the Federal Statutes, your home was not safe from creditors. If you were sued, a judgment creditor could lien your house and then foreclose it if you did not pay. The only way to save your home was bankruptcy
In 1993, the Connecticut legislature passed a homestead exemption saving $75,000 of equity in a home per owner from creditors! This meant that a married couple could own a home with no mortgage without fear of creditors until the home was worth more than $150,000 ($75,000 x 2). Add a mortgage balance to that number to increase the value of the home before other creditors could make a claim. Despite having the second highest per capita income in the country, not many Connecticut residents have more than $75,000 equity in their home.
However, there is catch. In order to take advantage of the exemption, your debts have to be incurred after the effective date of the law, October 1, 1993. Otherwise, there is no state exemption and your only remedy is to take advantage exemption in the Bankruptcy Code.