Despite what the name might suggest, homestead exemptions aren’t some kind of dusty old prospector or settler law. They are statutes that, in a bankruptcy filing, are designed to protect a primary residence from creditors.
If the Smiths file a Chapter 7 bankruptcy, how much equity they can protect with an exemption will be one of the factors determining whether they will be able to keep their home.
In a Chapter 13 bankruptcy, they won’t lose their home, but they will have to pay creditors an amount equal to the value of the property they can’t protect with an exemption, or their disposable income, whichever is more.
Before declaring bankruptcy, it’s best to consider the alternatives.
This guide will provide an overview of homestead exemptions as applied to bankruptcy, state by state.
What States Have a Homestead Exemption?
It’s easier to name the states that don’t have a homestead exemption since the vast majority of them do.
After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the only states without specific homestead exemptions are New Jersey, Pennsylvania, and Virginia. If you live in one of those states, then you know where you stand on potential shields with homestead exemptions.
If you live in any of the other 47 states, know that there are many more asterisks to hunt for depending on your situation and financial plans.
Even if you live in a state that offers homestead exemptions, this list of ways to help save money on your mortgage offers tips to weather financial storms, such as considering refinancing a home loan and requesting a new tax assessment.
If you are still renting and looking to buy a first home, give this list of pros and cons of buying a starter home a read as well. It digs into many of the big questions when making the huge decision of buying a home.
With a homestead exemption, a homeowner may be protected if a big setback strikes. But make sure to do your homework on the particulars of each state, and how home equity works.
Which State Has the Best Homestead Exemption?
While there is no literal “best” state to homestead in, because there are so many individual factors to weigh in assessing what’s advantageous, it is true that some states are more favorable than others for seeking the exemption.
Before reading the following, an asterisk: Because homestead exemptions are protections for primary residences, you cannot claim an exemption on an investment or vacation home.
Some states allow bankruptcy filers to use federal bankruptcy exemptions instead of the state exemptions.
The federal homestead exemption allows you to protect up to $25,150 of the equity in your home, and in cases where you and your spouse file taxes separately, do not live together, maintain separate homesteads, or (according to at least one court) do not have a direct financial connection with each other, each spouse can claim a separate homestead, up to the amount allowed an individual.
Also, most states allow a “wildcard” exemption that can be of particular help if one or more of a debtor’s other exemptions falls short of protecting their equity. A wildcard exemption amount can be divided among multiple items.
Since there’s so much variability in local, regional, and state codes and how they define the homestead exemption, when available, a good resource to consult is Nolo. Since 1971, Nolo has been a source of information for people who want to educate themselves better on legal matters but also are likely on the path to seeking professional help.
Here’s a rundown of states that offer some of the strongest protections for the homestead exemption. “Strongest” here is being interpreted as either affordances for high exemptions or greater flexibilities in the law—but other factors, such as cost of living, should also be a consideration:
1. Florida. Under the Florida exemption system “homeowners may exempt an unlimited amount of value in their home or other property covered by the homestead exemption. However, the property cannot be larger than half an acre in a municipality or 160 acres elsewhere.” The exemption can also be claimed by the spouse or children of a deceased owner.
2. Georgia. Homeowners may exempt up to $21,500 of their home or other property covered by the exemption. They can also apply $5,000 of any unused portion of the exemption to another property they own—a “wildcard” exemption.
3. Iowa. An unlimited value in one home or a one-unit apartment can be sought in protection. The property must be in a city or town and is limited to one-half acre or 40 acres elsewhere.
4. Kansas. An unlimited amount of value can be sought in protection, but homeowners are limited in the amount of land they can protect. Homeowners can protect up to 1 acre of property if they live within city limits or up to 160 acres of farmland.
5. Minnesota. You can protect up to $450,000 of equity in your home and land or up to $1,125,000 of equity if your land (up to 160 acres) is used for agricultural purposes.
6. New Hampshire. You can protect up to $120,000 in equity.
7. Oklahoma. The limits on the homestead exemption apply only to acreage. You can exempt up to 1 acre if you live in a city, town, or village or up to 160 acres if you live elsewhere. (If you use more than 25% of the total square footage of your property for business, your exemption is limited to $5,000.)
8. Rhode Island. The exemption applies for up to $500,000 of equity.
9. South Dakota. If your home is less than 1 acre in a town or 160 acres in any other type of area, all of your equity is exempt.
10. Tennessee. Homeowners can exempt up to $5,000 of equity—and that amount goes up to $7,500 for joint owners and $25,000 if there’s at least one minor child who is a dependent. People 62 and older can exempt up to $12,500 of equity in their home—$20,000 if married, and $25,000 if the spouse is also 62 or older.
11. Texas. For residences on 10 acres or less in a city, town, or village or 100 acres or less in the country, Texas offers an unlimited homestead exemption.
Here’s all the rest:
1. Alabama. The Alabama Department of Revenue indicates that at the state level, homestead exemptions have a maximum value for people under the age of 65 of $4,000. It only applies on land area that is not more than 160 acres, and there is no limit on the homeowner’s income for the exemption to be applied. This link also includes breakdowns of nuances at the county level along demographic and land-value thresholds.
2. Alaska. Homeowners may exempt up to $70,200 of their home or other property covered by the homestead exemption. There may be some qualifications if the property is not a traditional house or condominium.
3. Arizona. Homeowners can exempt up to $150,000.
4. Arkansas. There are two systems in Arkansas for homestead exemptions. You can either choose to seek protections on a property used as a residence up to $800 if single or $1,250 if married. Or you can seek an unlimited amount of equity in 80 rural acres or one-quarter urban acre. If the land isn’t worth $2,500, you can increase the acreage up to 160 rural acres and 1 urban acre, up to a total equity of $2,500 in value.
5. California. Similar to Arkansas, California has two systems for the homestead exemption. Under one system, a single homeowner who is not disabled can exempt up to $75,000 of the property. If they live with a family member, the amount rises to $100,000—or $175,000 if they are 65 or older or disabled. Another system applies a wildcard exemption to the property of the debtor or the dependent of the debtor—and protects up to $26,800.
6. Colorado. Up to $75,000 of equity in a home or other property, such as a mobile home, is protected. The amount increases to $105,000 if the homeowner, spouse, or dependent is disabled or 60 or older.
7. Connecticut. Protects up to $75,000 of equity in real property, a co-op, or a manufactured home occupied at the time of filing bankruptcy.
8. Delaware. Exempts up to $125,000 in real property or a manufactured home that was used as a principal residence. Also, any interest that the debtor has in real estate held as a tenancy by the entirety is exempt.
9. Hawaii. If you’re the head of a household or over 65, you can exempt up to $30,000 of equity in no more than 1 acre of property. If you’re not the head of the family, you may protect up to $20,000 of equity in your home. There’s also a rule providing for the sale proceeds of homes to be exempt for six months after the sale.
10. Idaho. A filer can protect up to $175,000 in equity in a home or mobile home.
11. Illinois. Protects up to $15,000 in equity in your home, which includes a farm, mobile home, lot with buildings, condominium, or cooperative. The exemption includes proceeds from the sale of a homestead for one year.
12. Indiana. A debtor can exempt up to $19,300 in real estate or personal property used as a residence. In addition, any interest the debtor has in real estate held as a tenancy by the entirety is exempt unless both owners file for bankruptcy.
13. Kentucky. Up to $5,000 of equity can be claimed.
14. Louisiana. Homeowners are allowed to exempt up to $35,000 of home equity, and more “if your debts were incurred due to catastrophic or terminal illness or injury.”
15. Maine. Including co-ops, up to $47,500 of equity in property used as a residence can be claimed. Burial plots are subject to the same exemption amount. The amount can be increased to $95,000 in equity if you have a minor resident residing with you, or if you or your dependent is 60 or older or disabled and unable to maintain employment.
16. Maryland. Exempts residential property value up to $25,150 (husband and wife may not double). Property held as tenancy by the entirety is exempt against debts owed by only one spouse. Wildcard exemption: $6,000 of cash or any property.
17. Massachusetts. The state automatically protects up to $125,000 in home equity, and up to $500,000 for those who file and receive the homestead exemption. There are special rules if the filer is over 62 or disabled.
18. Michigan. Each homeowner and their dependents can exempt up to $40,475 in a property covered by the homestead exemption. If the homeowner is 65 or older or disabled, the exemption amount increases to $60,725.
19. Mississippi. An exemption of up to $75,000 of equity in the real estate you live in can be claimed, as long as the property is less than 160 acres. If you’re over the age of 60 and married or widowed, you can also claim the exemption for a former residence.
20. Missouri. You can exempt up to $15,000 of equity in the real estate in which you live or will live, or up to $5,000 of equity in a mobile home in which you live.
21. Montana. Up to $250,000 in equity can be protected as applied to up to 320 farm acres, a quarter of a city acre, or 1 residential acre outside a municipality.
22. Nebraska. Up to $60,000 can be protected on a home, provided it does not exceed two lots in a city or village or up to 160 acres outside a city or village.
23. Nevada. Up to $605,000 in equity on a home or mobile home can be claimed.
24. New Mexico. Up to $60,000 of equity in your home can be protected.
25. New York. The homestead exemption amount varies greatly depending on the county. If the property is in the counties of Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, or Putnam, the exemption is $170,825. If the property is in the counties of Dutchess, Albany, Columbia, Orange, Saratoga, or Ulster, the exemption amount is $142,350. For any other county in the state, the exemption amount is $85,400.
26. North Carolina. Homeowners may exempt up to $35,000 of their home or other personal property. Homeowners who are 65 or older whose spouse is deceased may exempt up to $60,000, but only “if the property was previously owned by the debtor as a tenant by the entirety or as a joint tenant with rights of survivorship.”
27. North Dakota. Exempts up to $100,000 of equity in your home, “house trailer,” or mobile home.
28. Ohio. Protects up to $145,425 of equity in one parcel of real or personal property (home, manufactured, or mobile home) that you or your dependent uses as a residence.
29. Oregon. A property owner may exempt up to $40,000. Married couples may exempt up to $50,000.
30. South Carolina. Protects up to $60,975 in equity in a home or real estate used as a residence.
31. Utah. Homeowners may exempt up to $30,000. Bankruptcy filers can also use the exemption to protect more than one parcel of land, but may protect up to 1 acre only.
32. Vermont. An exemption up to $125,000 of the equity in a home, condo, or mobile home can be claimed.
33. Washington. Up to $125,000 of equity in a debtor’s home or principal residence, including a manufactured or mobile home, can be protected under the homestead exemption.
34. West Virginia. Homeowners may exempt up to $25,000 of their home or other property.
35. Wisconsin. Up to $75,000 of equity in a home can be exempted.
36. Wyoming. Up to $20,000 of equity in a home can be shielded.
Still with us? If you don’t see a state listed above, that means it doesn’t offer any homestead exemptions for use in a bankruptcy filing.
Homestead exemption rules in a bankruptcy filing differ greatly by state. If you can’t keep your head above financial water, will you lose your home? It depends on several factors.
Someone in your local government can refer you to up-to-date information beyond what you might find online. And of course a consumer law attorney has answers.
Refinancing a mortgage may provide some relief to a struggling homeowner. SoFi offers a refi, cash-out refi, and student loan cash-out refi.
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