Many debtors worry about what will happen to their home when they file bankruptcy. Many tend to steer away from the idea of filing in fear they will lose their home. The good news is that most people who file are able to keep their homes thanks to the homestead exemption. The exemption can be utilized in either Chapter 7 or Chapter 13 bankruptcy .
The homestead exemption offers protection for your home by protecting equity. The protection offed by the exemption will likely depend on the state you reside. Each state offers exemptions on the state and federal levels that may protect all or a portion of equity in your home. The exemption may also help reduce payments to unsecured creditors; this is a helpful advantage for debtors seeking Chapter 13 protection.
While the exemption can help protect your home, you’ll need to review how much home equity can be exempted. Some states may offer protection for the full amount of equity in your home, while others may only protect a small portion. Some states give married couples a double exemption if they file a joint petition. Learn whether or not your state has what’s called a homestead declaration; this may need to be completed before utilizing the homestead exemption.
Your state may allow you to choose between the state or federal exemption if you are not required to use the state exemption. In some cases, the federal exemption may offer more protection than at the state level.