Homestead Exemptions: Saving Your Home in Bankruptcy

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Navigating bankruptcy can be daunting, especially when it comes to protecting your home. Understanding homestead exemptions is essential for safeguarding your primary residence, and seeking the guidance of a bankruptcy attorney near you can make all the difference in securing your financial future.

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Learn how homestead exemptions can protect your home during bankruptcy proceedings. Discover the importance of working with a bankruptcy attorney near you to navigate Chapter 7 and Chapter 13 exemptions effectively, ensuring you keep your primary residence safe from creditors.

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Rectangular flat vector illustration of a person standing in front of their house protected by a large shield labeled "Homestead Exemption." The house displays a dollar sign symbolizing protected equity. Icons for Chapter 7 and Chapter 13 bankruptcy paths, a legal scale, and a "Bankruptcy Filing" document are nearby. A computer screen shows "Bankruptcy Attorney Near You" via ReferU.AI, all styled in muted purples, yellows, and grays in a clean, minimalistic design.

Bankruptcy Law

Federal vs. State Exemptions: Which Set Do You Use?

Bankruptcy Exemptions & Protecting Your Assets

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Mar 30, 2025 06:20 PM

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Homestead Exemptions: Saving Your Home in Bankruptcy

If you’re facing bankruptcy, one of the biggest questions on your mind is likely: “Can I keep my home?” The good news is that homestead exemptions exist specifically to protect your primary residence, and they’re one of the most powerful tools for asset protection in a bankruptcy case.

In this post, we’ll explain what homestead exemptions are, how they work in both Chapter 7 and Chapter 13 bankruptcy, and how a bankruptcy attorney near you can help you keep your home and get a fresh financial start.

💡 For every post in this series, scroll down to “Related Posts.”

What Is a Homestead Exemption?

A homestead exemption is a legal provision that allows you to protect a certain amount of equity in your primary residence from creditors in bankruptcy. Equity refers to your home’s market value minus the amount you still owe on your mortgage.

Example:

Home market value: $280,000

Mortgage balance: $200,000

Equity: $80,000

If your homestead exemption protects $100,000 or more, your home is safe from liquidation in Chapter 7.

How Homestead Exemptions Work in Chapter 7

In Chapter 7 bankruptcy, a trustee may sell your non-exempt property to pay creditors. But if your home equity is fully covered by your homestead exemption, the trustee cannot sell it—you get to keep your home.

If your equity is below the exemption limit, you’re protected.

If your equity exceeds the exemption limit, the trustee may attempt to sell your home to distribute the excess to creditors.

How Homestead Exemptions Work in Chapter 13

Chapter 13 bankruptcy allows you to keep your home regardless of your equity, but the homestead exemption still matters. Why?

Your monthly repayment plan must cover the value of non-exempt equity over 3–5 years.

A larger exemption means a smaller required repayment amount.

So, even in Chapter 13, maximizing your homestead exemption reduces your repayment burden and protects your assets.

Federal vs. State Homestead Exemptions

As detailed in Federal vs. State Exemptions: Which Set Do You Use?, homestead exemption limits vary significantly by jurisdiction:

Federal Exemption (2024):

~$27,900 for individual filers

State Examples:

Florida: Unlimited homestead exemption (with acreage limitations)

Texas: Unlimited exemption for urban and rural homes

California: Up to ~$600,000 (based on county median home prices)

New York: $89,975 to $179,950 depending on location

Some states allow you to choose between federal and state exemptions, while others require you to use state-specific rules. A bankruptcy lawyer near you can help you choose the right system for maximum protection.

Special Homestead Protections to Know

Married couples filing jointly may double their homestead exemption in some states.

Some states offer “wildcard exemptions” that can be added to homestead coverage.

Homestead protections may not apply to investment or rental properties—only your primary residence.

Mistakes to Avoid

Underestimating your equity

Choosing the wrong exemption system

Assuming you’re protected without knowing your state’s limits

Filing alone when joint filing offers double protection

Why You Need Local Legal Help

Because homestead laws are state-specific, a bankruptcy attorney near you is crucial to protect your home properly. They can:

Determine your home’s true equity

Select the best exemption system

Structure your Chapter 7 or Chapter 13 plan strategically

Prevent errors that could put your home at risk

ReferU.AI Makes It Simple

ReferU.AI connects you with a bankruptcy attorney near you who understands your local homestead laws and exemption limits. Don’t risk your home on guesswork—get expert guidance tailored to your state.

Homestead Exemptions: Saving Your Home in Bankruptcy