Many consumers, in financial trouble, wonder if they will lose their home when they file for bankruptcy. The answer is that ? it depends on your homestead exemption. In a bankruptcy filing, your homestead exemption is the amount of equity in your home that you legally are allowed to keep when you file for a bankruptcy under Chapter 7.
The state of your mortgage payments is a primary consideration. If your mortgage payments are up to date and the amount of equity that you have in your home is less than or equal to the homestead exemption amount, your odds are pretty good of keeping your home once your bankruptcy filing has run its course. The homestead exemption is state based and each state has different rules as to how it is calculated and how it is applied in a bankruptcy proceeding.
In order to take advantage of homestead exemption, however, you have to be a resident of the state in which you are filing for bankruptcy. Each state has its own residency requirements as to what constitutes someone being a resident of that state. If you are unsure as to your residency status, you may want to talk briefly to a bankruptcy lawyer in that state before filing.
The way your homestead exemption is computed is done on a state by state basis as well. For example, in some states, the homestead exemption is a pure monetary number. In other states, however, it is based on your lot size. And, in still others, it is based on a combination of lot size and a monetary value.
There are various factors at play in determining if you will be able to retain your home once you file for bankruptcy. Of all these factors, however, your homestead exemption is the most critical factor. So, if you are at all confused about the application of the homestead exemption in your state, seek legal help before you file for bankruptcy.
In all but the rarest of cases, the homestead exemption only applies to your primary residence ? the one that you live in. In other words, if you live in Illinois, and own a vacation home in Wisconsin, the second home is not protected under homestead exemption.
This means that it can be sold or auctioned off to pay back creditors to whom you owe a debt. The homestead exemption, however, does apply to mobile homes and house boats, if they are your primary residence.
In most states, the homestead exemption automatically is considered and taken into account when you file for bankruptcy. In other states, however, you have to specifically make a claim in order to receive the homestead exemption. Check with your lawyer to determine the rules in your state.
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Source: http://www.iire.info/2012/03/Will-You-Lose-Your-Home-When-You-File-For-Bankruptcy/
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