A homestead exemption in bankruptcy protects your home equity from creditors in Chapter 7 bankruptcy and helps to lessen the payments in Chapter 13 bankruptcy.
If you have the equity in your home, homestead exemptions allow you to keep if you file for Chapter7 bankruptcy. The homestead exemption comes into play in Chapter 13 bankruptcy as well. It defines, in part, how much you will pay to your unsecured creditors. The homestead exemption applies to your residence that you cannot use it for other properties.
How to use the homestead exemption?
The impartiality in your Boston house prices is considered as an asset in your Chapter 7 bankruptcy and the trustee can take your house and sell it if you cannot exempt at equity. This is where the homestead exemption comes to the rescue. In Chapter 13 bankruptcy, if you have many nonexempt equity in your home, you will end up paying of bundle to unsecured creditors. Therefore, a generous homestead exemption can mean the difference in the midst of being able to find a Chapter 13 plan or not.
Want to learn more? Here’s an example on how the Homestead exemption works
Let us say, Boston condo prices is worth of $500,000 but you still have the mortgage balance of $400,000. It means that your equity in buying a house in Boston is $100,000. If your sate is homestead exemption is greater than $100, 000, then you have nothing to worry about. You can also use the exemption to keep the bankruptcy trustee from being able to sell the house in order to pay your creditors. However, if your states homestead exemption is only $50,000, then the trustee will ikely sell your house and sue the money to pay the creditors.
What is my Homestead exemption amount?
Homestead exemption is different for federal system and state. If state allow you to use a federal bankruptcy, you can currently exempt $23,675 under the federal homesteaded exemption. If you don’t live in a state that allow the federal exemptions, you can use the state home stead exemption.
Requirement of homestead exemption
In order to take for advantage in the state homestead exemption, you should owned and bought home for at least 4months prior to the bankruptcy. If are not satisfy on this requirement, federal law caps your homestead exemption at $160,375 regardless on your exemption amount.
Massachusetts homestead law
Chapter 395 of the Acts of 2010, an Act Relative to the Estate of Homestead revises and replaces the provision of Massachusetts homestead protection law, General Laws Chapter 188.
If you filed a homestead declaration, your $500,000 protection will continue to apply and no need to refile. New law creates an automatic $125,000 protection on homes that dot have homested declaration field at Registry of Deeds in order to safeguard the deposits and situations where the declaration may e incorrectly filed. For those individual that is 62 elder, the new law states that homestead may be filed on each person and aggregate protection increases $ 1 million.
This information is not designed to provide legal advice or address the practical effect of claiming of Homestead. Lexwin Realty LLC, a Boston real estate company, created this in order to help you understand what rights you must consult on.