Definition of Residence in Bankruptcy Exemptions
When a consumer files for bankruptcy protection under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, she can take advantage of certain exemptions, including a residential or homestead exemption.
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Function
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The function of the residence or homestead exemption is to permit a debtor in bankruptcy the ability to maintain his residence. Although bankruptcy primarily is governed by federal law, permissible exemptions--including one for a residence--are determined by the law of the state in which a particular bankruptcy court is located.
Considerations
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In defining what constitutes a residence for the purposes of a bankruptcy exemption, all states require the property to be the primary home of the debtor. Beyond that factor, there is tremendous variation from one state to the next. For example, some states (such as Florida) allow a residence to be of any monetary value to qualify for an exemption. Most states, however, limit the monetary value to a specific dollar amount. In defining a residence, most states limit the size of the land the property sits on, usually a limitation for an urban residence and one for a rural home.
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History
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The homestead exemption has a long history in debtor's law both in the United States and in other countries like the United Kingdom. The historical theory is that a debtor's family should not be further harmed and dispossessed of their shelter because of the debtor's insolvent financial condition. Doing so unnecessarily harms children and adds an additional burden to society at large.
Time Frame
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A debtor filing bankruptcy must claim her residence as a homestead exemption within the bankruptcy petition itself. Although a court might permit an amendment to a petition if a debtor overlooks claiming a homestead exemption, any significant delay in claiming that right can result in the bankruptcy court denying that protection.
Expert Assistance
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Bankruptcy cases are complex, both legally and procedurally. Therefore, if you want to ensure that all of your rights are protected, including those associated with your residence, consider seriously engaging the services of an attorney to represent you in your case. Local and state bar associations maintain directories of attorneys in different practice areas. Contact information for these organizations is available through the American Bar Association at abanet.org.
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References
Resources
- Photo Credit house image by Cora Reed from Fotolia.com
