Nearly every day, potential clients ask whether filing bankruptcy means they will lose their house. These concerns are completely valid! Losing their home is panic-inducing, especially for those who own real estate during the market crash. Thankfully, there are ways to protect your home while filing for bankruptcy! Namely, exemptions.
In bankruptcy, exemptions refer to specific assets that debtors can keep despite filing for bankruptcy. These exemptions vary depending on federal and state laws, and each state has its exemptions. Exemptions ensure that debtors are not left completely destitute after bankruptcy proceedings and can still maintain some financial stability.
If you have limited equity in your home, Federal exemptions are usually the go-to option. Federal exemptions can protect around $27,900 in real estate equity (11 U.S. Code § 522(d)(1)). So, if you just bought your house or have a lot of secured debt against your property, then federal exemptions will be the best option for protecting your home and your other assets.
If you have a lot of equity in your home, this is where Minnesota State exemptions step in. Minnesota exemptions can protect $480,000 of equity in your home of residence. (Minn. Stat. 510.02 subd. 1). However, if the property in question is somewhere you don’t live most of the time, like a seasonal cabin or hunting land, the Minnesota exemptions will not protect the property.
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No matter which exemption you file with, your mortgage payments will usually stay the same; keep making payments as usual, and there should be no reason to fear losing your home! Of course, every situation is different, so if you’re concerned about your home and filing bankruptcy, reach out to Minnesota’s most kind and helpful bankruptcy law firm by going now to www.lifebacklaw.com. We’re happy to walk you through what bankruptcy means for you and your home!
