Sacramento Bankruptcy: What is the Homestead Exemption and how does it Effect your Bankruptcy?

Most Sacramento consumers in bankruptcy wish to keep their home.  In every state, the law provides for a “homestead exemption” which protects a debtor’s equity in their residence up to a certain limit.  If your equity is less than the limit, then your house is protected and you can file bankruptcy and avoid having to sell your house to pay creditors.

States vary in the details regarding the amount of the homestead exemption.  The homestead exemption is determined by the laws of the state where you live assuming that you lived there at least two years.  If you moved more recently, the laws of your home state will control.  Home state is defined as the state where you lived for the majority of the 180 days prior to the last two years.

Newly implemented legislation limits the homestead exemption to $125,000 of equity in a residence purchased within 1215 days or 3 years, four months of the bankruptcy filing.  Conversely, if the house was bought previous to this 1215 day period, the calculation does not apply.

Additionally, if found guilty of securities fraud or certain other criminal acts, the exemption will also be limited to $125,000.  Fraud includes fraudulently converting nonexempt assets to exempt assets or disposing of property in order to defraud a creditor.  Call today to schedule an appointment with one of Sagaria Law’s Sacramento bankruptcy attorneys.

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