What is a homestead exemption?
A homestead exemption is a legal provision that protects a certain dollar amount of equity in your primary residence from being seized by creditors. In bankruptcy, this means the trustee cannot sell your home to pay creditors if your equity falls within the exempted amount.
Under 11 U.S.C. § 522, debtors can choose between the federal exemption scheme or their state's exemption scheme (in most states). Some states require you to use the state exemptions and do not allow the federal option.
11 U.S.C. § 522(d)(1) -- Federal homestead exemption: A debtor may exempt "the debtor's aggregate interest, not to exceed $27,900 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence."
This amount is for 2024 and adjusts every 3 years for inflation. Married couples filing jointly can each claim the full amount, doubling it to $55,800.
Federal vs. state exemptions
There are two exemption systems in bankruptcy:
- Federal exemptions under § 522(d) -- available in roughly 20 states that allow the choice
- State exemptions -- each state has its own set of exemptions, often significantly different from the federal amounts
In states that allow a choice, you must pick one system or the other -- you cannot mix and match federal and state exemptions. In "opt-out" states, you must use state exemptions.
Notable state homestead exemptions
| State | Exemption Amount | Notes |
|---|---|---|
| Texas | Unlimited | 10 acres urban, 100 acres rural |
| Florida | Unlimited | Half acre urban, 160 acres rural |
| Kansas | Unlimited | 1 acre in city, 160 acres rural |
| Iowa | Unlimited | Half acre in city, 40 acres rural |
| Massachusetts | $500,000 | $1M if elderly or disabled |
| Nevada | $605,000 | Updated 2024 |
| California | $300,000-$600,000 | Varies by county median home price |
| Missouri | $15,000 | Federal exemptions also available |
| New Jersey | $0 | No state homestead; use federal $27,900 |
This is a sample -- not comprehensive. Every state has different rules, and amounts change regularly. Always verify your state's current exemption before making decisions.
The 730-day residency rule
Under 11 U.S.C. § 522(b)(3)(A), you must have been domiciled in your current state for at least 730 days (2 years) before filing bankruptcy to use that state's exemptions. If you moved within the last 2 years, you may need to use the exemptions from the state where you lived during the 180-day period before the 730-day window.
This rule was added by BAPCPA in 2005 to prevent "exemption shopping" -- the practice of moving to a state with generous exemptions just before filing bankruptcy.
The 1,215-day cap: Even in unlimited-exemption states, if you acquired your homestead within 1,215 days (about 3 years and 4 months) before filing, the exemption is capped at $189,050 under 11 U.S.C. § 522(p). This prevents someone from buying an expensive home in Texas or Florida right before filing to shelter assets.
How the exemption works in practice
The homestead exemption protects equity -- not the entire value of your home. Here is how to calculate whether your home is fully exempt:
- Determine the fair market value of your home
- Subtract all liens (mortgage, HELOC, tax liens, judgment liens)
- The result is your equity
- Compare your equity to the available homestead exemption
If your equity is less than or equal to the exemption, your home is fully protected. If it exceeds the exemption, the difference is "non-exempt" equity, which the trustee may try to reach in Chapter 7 or which you must pay the equivalent of in Chapter 13.
Many homeowners have little or no non-exempt equity. Between mortgage balances, the costs of selling, and the exemption itself, most homes in consumer bankruptcy cases are fully protected. The trustee will file a report of "no distribution" and move on.