The Homestead Exemption can be challenging, but here are some basics Skip to main content

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The Homestead Exemption can be challenging, but here are some basics


We have put a lot on the blog about how your home can be affected by bankruptcy. Hopefully, you've read through some of those posts. If not, simply do a search to find as much as you can about the topic because knowing how bankruptcy affects where you lay your head down at night can be very helpful to you and your family. To continue on the topic, let's talk about the Homestead Exemption. It can be a little confusing and this post will touch on the general aspects of it and the specifics can (and should) be left for your face-to-face meeting with one of our attorneys. Homestead exemption laws are in place to shield your house from creditors who do not have a lien on it. In other words, your credit card company can't come after it. The amount of value placed on your home is based on its equity. If the market says your home is worth $200,000 and you owe $180,000 on the mortgage, your equity is $20,000. Pretty simple math. Different states have different numbers for the amount of the exemption. So, if you are in a state where the exemption is $20,000 or more, your only concern is the mortgage holder. Thus, one of the best questions you can put on your list when you meet with your bankruptcy attorney for the first time is: "What is the state's homestead exemption?" In North Carolina, it's $18,500 per owner. (But that is not all you need to know about it; so still ask the question!) In most states, the amount of the exemption is limited. Some states in the South and Midwest, however, have unlimited homestead exemptions, including Texas, Florida, Iowa and South Dakota. However, even in those states, if you acquired your home within 1,215 days of bankruptcy, you are limited to protections of only $125,000. Here's another confusing aspect of the homestead exemption laws: some states allow you to choose either their state's exemptions or the federal government's exemptions under the Bankruptcy Code. North Carolina does not, however. You are subject to the state's rules. Also, you need to have been a resident of your state for at least two years to claim the exemption in your current state. However, if you have not lived in your state for two years, you are subject to the exemption rules of the state in which you lived 180 days prior to filing. As some people have done, never try to leverage the homestead exemption by quickly buying down your mortgage in order to create more equity. The amount of the exemption can actually be reduced by whatever amount of equity a person tries to create intentionally as a way to hamper creditors ability to collect from you. So, let's say things were starting to get bad for you and the creditors have found your phone number. You decide that a bunch of cash you have from a recent windfall will be better spent buying into your mortgage instead of paying off the delinquent boat loan. If you then file for bankruptcy within a few weeks, your homestead exemption will be reduced by that amount. The homestead exemption is one of the more challenging bankruptcy concepts to grasp at first, which again, is why you should make sure to ask your bankruptcy attorney about how it will affect you. In the end, it's all about protecting your home. While you may have made some spending errors along the way, they are certainly not worth losing your home. Live in North Carolina and need to find out what your rights are. Contact the bankruptcty attorneys at the Law Offices of John T. Orcutt, experienced attorneys offering a totally free and confidential consultation and serving 28 counties in N.C. (See list at To make an appointment for a free consultation, during normal business hours, call toll free +1-919-646-2654, or make an "online" appointment by visiting our website at

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