Homestead Exemption: Protect Your Home in Bankruptcy

One of the biggest worries you may have about filing bankruptcy is losing your home.

The good news? Many homeowners keep their houses thanks to the homestead exemption. Your home equity gets protection when you file Chapter 7 bankruptcy.

In some states, the exemption protects a home completely. In others, it may only cover part of your equity.

You’ll learn how the homestead exemption works, when it protects your home, and what options you have when it’s not enough.

What Is a Bankruptcy Exemption?

A bankruptcy exemption is legal protection that helps you keep certain property when you file Chapter 7 bankruptcy. Federal and state laws both offer exemptions. Each state has its own rules about which set you can use.

Exemptions protect personal property like your car, household goods, work tools, and clothing. They also protect real property like a home and land you own. Some exemptions even cover intangible property like retirement accounts and life insurance policies.

Many states offer a wildcard exemption. You can use it to protect anything you choose, including extra home equity not covered by the homestead exemption.

Chapter 7 bankruptcy is powerful debt relief. It wipes out credit card debt, medical bills, and other unsecured debts.

What Is the Bankruptcy Homestead Exemption?

The homestead exemption protects equity in your primary residence. In some states, it also covers mobile homes or manufactured homes.

💡 Equity is the part of your home’s value that you actually own. It’s your home’s market value minus what you still owe on your mortgage.

The homestead exemption typically can’t protect rental properties, vacation homes, or other real estate. It only covers your primary residence.

Homestead exemption rules vary widely depending on where you live. Some states offer unlimited protection. Others have strict dollar limits. Some states increase the exemption for married couples. Others don’t.

A small number of states, including New Jersey and Pennsylvania, don’t have a homestead exemption at all. If your state doesn’t have one and you’re allowed to use the federal exemption instead, you may still get some protection.

How Much Equity Can the Homestead Exemption Protect?

The homestead exemption amount only needs to cover your equity. Not the home’s full value.

🏠 Equity is what’s left after subtracting your mortgage and any other property loans from your home’s market value.

For example, your house is worth $200,000. You still owe $180,000 on the mortgage. Your equity is $20,000. If your state’s homestead exemption covers that $20,000, your house should be protected in Chapter 7.

State vs. Federal Homestead Exemptions

Every state sets its own exemption laws. Some states let you choose between state exemptions and federal bankruptcy exemptions. Others require you to use the state’s list. You can’t mix and match exemptions between the two.

The federal homestead exemption protects $31,575 in home equity for individual filers. It protects $63,150 if you’re filing jointly with your spouse.

The federal homestead exemption amount updates every three years. It was last updated April 1, 2025.

Homestead Exemptions by State

Choosing between state and federal exemptions can feel tricky. If you own a home, the homestead exemption will likely be a big factor. Here’s a rundown of each state’s homestead exemption (amounts for individual filers; some amounts can be doubled if filing jointly):

• Alabama: $18,800
• Alaska: $54,000
• Arizona: $250,000
• Arkansas: Depends on property location. Rural property: up to 80 acres regardless of equity value. Urban property: up to one-quarter acre regardless of equity value.
• California: $300,000–$600,000 (varies by county median home value)
• Colorado: $250,000
• Connecticut: $75,000
• Delaware: $125,000
• Florida: Unlimited (limited to half-acre in municipality or 160 acres outside)
• Georgia: $21,500
• Hawaii: $20,000 ($30,000 if head of household)
• Idaho: $175,000
• Illinois: $15,000
• Indiana: $22,750
• Iowa: Unlimited (applies to dwelling plus up to ½ acre in city or 40 acres rural)
• Kansas: Unlimited (up to 1 acre in city or 160 acres rural)
• Kentucky: $5,000
• Louisiana: $35,000
• Maine: $80,000 or $160,000 for debtor with minor dependents, people 60+, or those with disability
• Maryland: Must use federal exemption of $31,575
• Massachusetts: $500,000
• Michigan: $46,125 or $69,200 if you or dependent is 65+ or disabled
• Minnesota: $510,000 or $1,275,000 if used primarily for agriculture
• Mississippi: $75,000
• Missouri: $15,000
• Montana: $409,450
• Nebraska: $60,000
• Nevada: $605,000
• New Hampshire: $120,000
• New Jersey: None; must use federal exemption of $31,575
• New Mexico: $150,000
• New York: Depends on property location. Queens, Kings, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, or Putnam counties: $204,825. Dutchess, Albany, Columbia, Orange, Saratoga, or Ulster counties: $170,700. All other counties: $102,400.
• North Carolina: $35,000
• North Dakota: $150,000
• Ohio: $182,625
• Oklahoma: Unlimited for residential property (limited to 1 acre urban or 160 acres rural; business use must be less than 25%)
• Oregon: $40,000 ($50,000 for married couples)
• Pennsylvania: None; must use federal exemption of $31,575
• Rhode Island: $500,000
• South Carolina: $76,125
• South Dakota: Unlimited (less than 1 acre in town/city or 160 acres in rural area)
• Tennessee: $35,000 for individuals; $52,500 for married couples
• Texas: Unlimited (up to 10 urban or 100 rural acres)
• Utah: $52,400
• Vermont: $125,000
• Virginia: $50,000
• Washington: $125,000 or previous year’s median property value for the county, whichever is greater (can’t be doubled; changes annually)
• West Virginia: $35,000
• Wisconsin: $75,000
• Wyoming: $100,000

What If Your Home Equity Is Higher Than the Exemption?

If you’ve built up significant equity and your state’s homestead exemption doesn’t cover all of it, filing Chapter 7 could put your home at risk. In that case, the bankruptcy trustee may choose to sell the home. They’ll pay off your mortgage and use leftover equity to repay creditors.

If your home equity isn’t fully protected and you want to keep your house, some people explore Chapter 13 bankruptcy instead. Others consider options like debt settlement or credit counseling. We cover each option in a later section.

Who Can Use the Homestead Exemption?

You can’t move to a new state just to get better bankruptcy protections. Federal law requires you to live in a state for at least 730 days (about two years) before using that state’s exemptions.

The rule exists to prevent people from relocating just to take advantage of a bigger homestead exemption.

For example, someone who owns a $400,000 home in New Jersey (which has no state homestead exemption) might be tempted to move to Florida. Florida offers unlimited protection. But unless they’ve lived in Florida for two full years, they likely won’t be able to use Florida’s exemption.

Can You Use the Homestead Exemption to Stop Foreclosure?

The homestead exemption protects equity in your home during bankruptcy. But it doesn’t stop a foreclosure if you’re behind on your mortgage. That’s because mortgage lenders are secured creditors. They have the right to take the home if the loan isn’t paid.

Filing your bankruptcy petition can temporarily delay a foreclosure through something called the automatic stay. But once the case ends (usually in a few months), the lender can resume foreclosure if you’re still behind on payments.

Some homeowners in this situation look into Chapter 13 bankruptcy instead. Chapter 13 sets up a 3–5-year repayment plan. It can give you time to catch up on missed mortgage payments while keeping your home.

Can You Still File Bankruptcy If Your Home Isn’t Fully Protected?

Debt Relief Options That May Help You Keep Your Home

If your home equity goes over the exemption limit in Chapter 7, the bankruptcy trustee has the right to sell your house. They’ll use proceeds to pay your unsecured creditors. That’s why many homeowners in this situation explore alternatives.

Here are a few common paths:

• Credit counseling or a debt management plan: Nonprofit credit counselors can help you reorganize your debts. Our partner Cambridge Credit Counseling offers manageable payment plans that may help you avoid bankruptcy.
• Debt settlement: Some people try to settle unsecured debts like credit cards or medical bills. You’ll lower your overall payments. Settlement doesn’t reduce what you owe on your mortgage. But it might free up enough cash to stay current on housing costs and avoid foreclosure.
• Chapter 13 bankruptcy: This option lets you keep your home and other property. You’ll pay back some or all of your debt over 3–5 years. Chapter 13 can be a good fit for people with high home equity or past-due mortgage payments. You must be able to stick to a strict budget for several years.

Protect Your Home While Getting Debt Relief

If you’re thinking about filing bankruptcy and you own a home, the homestead exemption is one of the most important things to understand. It helps protect your home equity in a Chapter 7 case. How much protection you get depends on your state’s exemption laws.

Some states offer generous homestead protections. Others have strict limits or none at all. The federal homestead exemption is $31,575.

Even if your home equity goes over the exemption amount, you’re not out of options. Many people in this situation look into Chapter 13 bankruptcy, debt settlement, or credit counseling to avoid losing their homes.

You deserve to understand your options before making such an important decision. Speaking with a bankruptcy attorney for free can help you determine if the homestead exemption protects your home. You’ll also learn about other debt relief paths that might work better for your situation.