Why Is There a Homestead Exemption Under Chapter 7 Bankruptcy?
The stress of living with overwhelming debt can be very burdensome. In fact, some New York residents may be willing to do anything in order to get out from under the crushing weight of outstanding financial obligations. However, built-in protections to the bankruptcy laws often prevent individuals from becoming destitute during the process of climbing out of debt.
These protections come in the form of exemptions, and one of the most significant exemptions available to individuals who file for Chapter 7 bankruptcy is the homestead exemption. Federal and New York laws establish a value of wealth in a person’s home that may be protected from liquidation during the Chapter 7 bankruptcy process. Unfortunately, the value of the exemption may not be sufficient to protect the entire value of the home owned by the debtor.
Understanding how exemptions work and whether federal or New York exemption laws are more accommodating to a particular debtor’s situation can be confusing. For this reason many individuals choose to consult with bankruptcy attorneys to discuss their bankruptcy options and to learn about how their wealth and property may be affected as a result of filing for Chapter 7 bankruptcy.
Aside from the homestead exemption a number of other exemptions exist to protect some of the wealth and assets held by Chapter 7 filers. Vehicles, jewelry, and other items of property may be protected from liquidation if a filer properly uses the exemptions available to him. However, as every bankruptcy filer’s situation is different, individuals who wish to utilize Chapter 7 exemptions should consult with bankruptcy attorneys about how their liquidation processes will be resolved. This post is intended to introduce the topic of the homestead exemption and should not be relied on as legal advice.