The Homestead Exemption in Bankruptcy is Hard to Lose

25 Sep The Homestead Exemption in Bankruptcy is Hard to Lose

I recently blogged the question “Is it possible to lose my homestead exemption in bankruptcy court?”    This is an important question because people who file bankruptcy want to be sure that their homes will be safe.   

That question has now been clearly answered in the Northern District of New York.   Bankruptcy Court Judge Diane Davis has ruled that in order to lose one’s homestead exemption, it takes bad faith amounting to “extraordinary circumstances”.  Also, the bad faith must be connected to the debtor’s homestead exemption claim.  

Of course, you should never exhibit bad faith when you file bankruptcy.  You should honestly state all of your assets and liabilities, income and expenses.  Occasionally, however, people will make mistakes.  Judge Davis’ ruling ensures that unless mistakes are made that rise to the level of bad faith, AND, unless that bad faith has to do with the homestead exemption itself, the homestead exemption, and therefore the property, is safe.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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