One of the most important exemptions in bankruptcy (property you can protect and keep) is the homestead exemption which protects $60,000 of equity in your home, or $90,000 if you are over 60 years old or disabled.
This means that if you file chapter 7 bankruptcy in Denver and are current with your mortgages you can keep your home if you are under these limits. For example, if your house is worth $200,000 and you owe $150,000, the house is fully protected.
In our practice, people usually have either no equity in their home (recent purchase), or maybe $20 or $30 thousand because second mortgages were taken out to keep up with bills, and thus equity was reduced to comfortable limits.
Lately, however, real estate has been rising so rapidly (Trulio reports values up 10% in just the last year on many homes) that some folks are bumping up against the limits when just a year or two ago they were comfortably under.
Our recommendation is to check online estimates (Trulio, Zillow), and get a market analysis from a realtor in your neighborhood if you are concerned you may be near the limits. The online estimates are a good starting place, but are not necessarily conclusive as they use average prices, and each home is usually quite different based on location and condition. For example, Zillow may show a property worth $300,000 based on averages when the houses used have been refurbished and recently updated. If your house is in poorer condition it could be worth considerably less, say $250,000, and would only be worth the higher number after $50,000 or repairs and improvements.
One other note on value is that certain deductions can be taken for cost of sale in calculating property values for the homestead analysis.
Finally, there is currently law change (Senate Bill 15-283) being considered that would raise the limits to $75,000, or $105,000 for those over 60 or disabled. If approved, this law would take effect July 1, 2015.
If you need a chapter 7 and have questions about your home, call me, Peter Milwid, at 303-831-0733 and I would be happy to explain how these rules might apply to you.
