Everyone filing bankruptcy is entitled to certain exemptions (see the excellent article by Brett Weiss). One of the most common of those is a homestead exemption. The amount of the exemption varies from state to state. Thus, although it’s easy to say that anybody owning a home is entitled to exempt at least part of the non-secured equity, just how much will be covered is not an easy question to answer.
When BAPCPA was passed, in October 2005, the law in this area dramatically changed. The amount of exemptions used to depend purely on what state you lived in when you filed bankruptcy. Some states elected to use the federal exemptions, and some states chose to use their own state exemptions. Under the new law, however, you may not be entitled to use the exemptions of the state where you live when you file.
Section 522 of the bankruptcy code explains that if you haven’t lived in the state where you file for at least two years (730 days) before filing, then you must use the exemptions of the state you used to live in. Sometimes, you use the exemptions of the state you lived in for the longest period of time during the two years prior to filing bankruptcy. Further, you can only claim a maximum of $136,875 as a homestead exemption in a house regardless of the state’s law if you haven’t lived in the house for at least 1215 days prior to the date of filing.
So the answer to the question posed in the title is that you are entitled to some exemption, but without a careful review of your state’s laws and the bankrutpcy law, it’s impossible to tell how much.
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Last modified: October 22, 2012