《楊清泉律師專欄》HOMESTEAD EXEMPTION LIMITED BY SECTION 522(P)(Part I)
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Section 522 contains the Federal exemptions for bankruptcy. Not all states have the same amount of homestead exemptions. So, some debtors may engage in bankruptcy forum shopping where they move to the state with the most generous homestead exemption just before filing for bankruptcy relief. For instance, the homestead exemption for California for a debtor with at least one family member living with him and below 65 years old is $100,000. But in Massachusetts, the homestead exemption is $500,000 if you are below 62 years old, and the exemption increases to $1.0 million if you are at least 62. In California, it only increases to $175,000 if you are at least 65 years old. So, what if you are at least 62 years old with a homestead in California with equity of $500,000 and decide that you are going to sell your house in California, move to Massachusetts, use the $500,000 from the sale proceeds of you California house to fully pay for a house in Massachusetts, then file for Chapter 7 bankruptcy relief in Massachusetts, to discharge $200,000 of credit card debt and $150,000 from a second trust deed on a rental property in Arizona that got foreclosed last year. This looks like a smart plan if it works because you would be able to protect the entire $500,000 of equity in your house in Massachusetts when you could have protected only $175,000 of equity in your house in California. BUT IT WON’T WORK because Section 522(P) of the bankruptcy code limits the homestead exemption claim to $146,450 if you acquired the property within 1,215 days before the date you filed for bankruptcy!
Section 522(P) states “…a debtor may not exempt any amount of interest that was acquired by the debtor during the 1215 – day period preceding the date of the filing of the petition that exceeds in the aggregate $136,875 (currently adjusted to $146,450) in value in: (A) real or personal property that the debtor or a dependent of the debtor uses as a residence; ( B) a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence;…or ( D) real or personal property that the debtor or dependent of the debtor claims as a homestead.”
HOMESTEAD EXEMPTION LIMITED BY SECTION 522(P)(Part II)
Section 522 contains the Federal exemptions for bankruptcy. Not all states have the same amount of homestead exemptions. So, some debtors may engage in bankruptcy forum shopping where they move to the state with the most generous homestead exemption just before filing for bankruptcy relief. For instance, the homestead exemption for California for a debtor with at least one family member living with him and below 65 years old is $100,000. But in Massachusetts, the homestead exemption is $500,000 if you are below 62 years old, and the exemption increases to $1.0 million if you are at least 62. In California, it only increases to $175,000 if you are at least 65 years old. So, what if you are at least 62 years old with a homestead in California with equity of $500,000 and decide that you are going to sell your house in California, move to Massachusetts, use the $500,000 from the sale proceeds of you California house to fully pay for a house in Massachusetts, then file for Chapter 7 bankruptcy relief in Massachusetts, to discharge $200,000 of credit card debt and $150,000 from a second trust deed on a rental property in Arizona that got foreclosed last year. This looks like a smart plan if it works because you would be able to protect the entire $500,000 of equity in your house in Massachusetts when you could have protected only $175,000 of equity in your house in California. BUT IT WON’T WORK because Section 522(P) of the bankruptcy code limits the homestead exemption claim to $146,450 if you acquired the property within 1,215 days before the date you filed for bankruptcy!
Section 522(P) states “…a debtor may not exempt any amount of interest that was acquired by the debtor during the 1215 – day period preceding the date of the filing of the petition that exceeds in the aggregate $136,875 (currently adjusted to $146,450) in value in: (A) real or personal property that the debtor or a dependent of the debtor uses as a residence; ( B) a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence;…or ( D) real or personal property that the debtor or dependent of the debtor claims as a homestead.”
HOMESTEAD EXEMPTION LIMITED BY SECTION 522(P)(Part II)
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