How much of my home and home equity is off-limits to creditors under the bankruptcy law?

Every state provides rules for exempting your home from a forced sale during bankruptcy. This is called a homestead exemption. Every state also provides some protection for home equity, the difference between the value of your home and the amount still due on your home.  

Most state exemption schemes, and the Bankruptcy Code exemption scheme, allow you to exempt some amount of the home equity (that is, the excess value over and above mortgage and other liens) in your principal residence. How much your equity can be protected will depend on your state’s exemptions laws and whether you are married or single.  Generally, if you are married, you will be able to exempt a higher amount of your equity.  Consult with a bankruptcy attorney in your state to see what the exact limits for equity are in your state.

Under certain circumstances, a trustee or creditor can force the sale of your home.  However, if your home is your designated homestead, the bankruptcy code does provide some exemptions. You do not get to claim multiple homesteads.  The homestead exemption for interests acquired within 1215 days of filing is limited to $170,350 (this dollar amount is adjusted every three years based on the CPI.  The next adjustment will be in April 2022). There are other situations in which BAPCPA limits or eliminates a homestead exemption.

The value of a home is reduced to the extent it is attributable to a transfer made within 10 years preceding the bankruptcy filing if (a) the assets transferred would not be exempt if they had been held on the petition date, and (b) the transfer was made with the intent to hinder, delay or defraud any creditor. Since an exemption may be claimed only to the extent of an asset’s value, this provision effectively reduces the available homestead exemption when it applies.

A homestead exemption is limited to $170,350 if, within the past 5 years, the debtor committed certain kinds of securities-law violations, federal felonies, or civil RICO violations. The homestead is likewise limited to $170.350 if the debtor owes a debt arising from any criminal act, intentional tort, or willful or reckless misconduct that caused serious physical injury or death to another individual in the preceding 5 years.