Can you File for Bankruptcy and Keep your Home?

If you have equity in your home and you file for bankruptcy, there are certain requirements that must be met in order to keep your home.  In both a personal Chapter 7 or Chapter 13 Bankruptcy, you can protect assets with a bankruptcy homestead exemption.  Each state has a list of exemptions, so the property type and amount of equity you can protect using state exemptions varies widely and these exemptions can change every couple of years.  

For example, in New York, as of April 1, 2021, the homestead exemption for properties located in Duchess, Albany, Colombia, Orange, Saratoga, and Ulster Counties is $149,975.   In Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and Putnam counties, the homestead exemption as of April 1, 2021 is $179,975.  All other counties in New York as of April 1, 2021 is $89,975.  

Homestead Exemption in a Personal Chapter 7 Bankruptcy:

If you have more equity than the homestead exemption allows for, then the court-appointed trustee in your Chapter 7 bankruptcy will sell the property and use the proceeds above your exemption amount to pay off some of your unsecured creditors, like credit cards and medical bills.

  • Example 1:
    • David lives in Westchester County and the fair market value of his home is $500,000.00.  If David owns his home free and clear (no mortgage), and filed a Chapter 7 bankruptcy due to credit card debt, the bankruptcy trustee would be able to sell his home and use the proceeds of the sale , minus the homestead exemption to pay off the creditors.  
  • Example 2:
    • James live in Orange County and the fair market value of his home is $250,000.00.  James owns the home subject to a mortgage, where the balance is $150,000.00.  Therefore, James only has $100,000.00 in equity and he files a Chapter 7 bankruptcy, James’ home would be protected, as he is under the homestead exemption of $149,975.00.

Homestead Exemption in a Personal Chapter 13 Bankruptcy:

If you have more equity than the homestead exemption allows for, then you won’t necessarily be forced to give up your property.  Instead, you will have to pay your creditors the non-exempt portion of equity into your bankruptcy plan.  

  • Example:
    • Michelle lives in Rockland County and the fair market value of her home is $200,000.00.  Michelle owns the home free and clear (no mortgage).  Michelle’s homestead exemption is $179,975.  Therefore, she is over the exemption by $20,025.00.  This means Michelle will have to structure her Chapter 13 payment plan so that the unsecured creditors will receive at least $20,025.00 over the life of the plan.  This amount is in addition to any other debts your plan payment must cover.

How to Find the Right Bankruptcy Lawyer in New York and Connecticut

It is incredibly important that in order to avoid property loss, you consult with an experienced attorney who knows the ins and outs of bankruptcy exemptions.  CGW has been helping people through the bankruptcy process for the last 40-years.  We offer free initial consultations to see if bankruptcy is the best fit and, if so, what type of bankruptcy would best fit your needs.  Please give us a call at 914.472.6202.

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