An exemption for family property is a legal resource that is designed to help people who go through the bankruptcy process to stay in their homes or be reasonably compensated for the loss of their residence. Exemptions for family property date back to the Civil War era, when solutions were sought to help rehabilitate debtors and ease the transition to a productive society.
These exemptions allow a limited amount of capital held by the owner of the home to be held separately from the assets used to pay the debtors. The precise amount of exemption for family property and how it is administered varies widely from state to state. The concept is present both in bankruptcy under Chapter 7 and in Chapter 13. In Chapter 7, it avoids the forced sale of housing and, in Chapter 13, partially determines the amount that will be paid to creditors without warranty.
How do I use an exemption for family benefit?
Only a person who has capital in a home can claim an exemption for family property. This means that the value of the home must exceed the amount owed by it. If the capital is less than the exemption, the owners of the houses can stay in their homes if they can continue paying the mortgage. If your home is sold, then the debtor can expect that part of the exemption amount will be returned for the sale.
An example of exemption for family good
Take the example of a home that is worth $ 300,000 with a mortgage balance of $ 200,000. That results in a value of $ 100,000 of capital. Debtors living in a state with a family exemption of $ 100,000 or more can generally stay in their homes as long as they continue paying the mortgage. If the amount of the exemption for family property of the state is less than that, then the receiver may sell the home and return the amount of the exemption to the debtor.
How much can I expect for my exemption for family property?
While some places are governed by the federal standard of $ 23,675 for a single person or $ 47,350 for marriages making a joint bankruptcy filing, many states have their own family property laws. Therefore, the amount can vary widely from one state to another. At one end of the spectrum, the Florida family asset exemption applies to the entire value of the property up to 160 acres if it is not located within a municipality. If that residence is within a municipality, then the Florida exemption only applies to half an acre with all the improvements for the value of the exemption. On the other hand, in Missouri you can only exempt $ 15,000 in capital.
Residence requirement of the exemption for family property and other limits
Regardless of the state in which the debtor resides, if you did not purchase the home and moved at least 40 months before filing for bankruptcy, then your exemption will have a federal limit of $ 160,375. One factor to note is that if the owner of the home sold his home and used the funds to buy another home in the same state within 40 months, the ownership of both homes can be taken into account for the domicile requirement.
The federal limit on the exemption also applies to anyone who has been convicted of fraud relating to bankruptcy and other similar crimes. Some municipalities may impose other limits on the exemption for family property and some states will allow the debtor to choose between state and federal amounts.
People filing for bankruptcy should speak with their Lawyers to find out the family exemption limit for their state or if federal limits apply. A Lawyer can help a client determine if it would be more beneficial to keep the home and how to include it in a payment plan.
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