How the homestead exemption works
The homestead exemption protects your equity in your primary residence. Equity is the difference between your home's market value and what you owe on it. If your equity is less than or equal to the exemption amount, the Chapter 7 trustee cannot sell your home.
If your equity exceeds the exemption, the trustee can sell the home. But the trustee must pay you the exempt amount from the sale proceeds, plus pay off the mortgage, plus cover the costs of sale. This often makes the sale economically impractical, even when equity exceeds the exemption by a small amount.
11 U.S.C. § 522(d)(1): Federal homestead exemption: $27,900 per debtor in real or personal property used as a residence (available in states that have not opted out).
11 U.S.C. § 522(p): Limits homestead exemptions to $189,050 for property acquired within 1,215 days (about 3.3 years) of filing, regardless of state law. This prevents last-minute purchases of expensive homes in unlimited-exemption states.
State homestead exemptions -- selected examples
| State | Homestead Exemption | Notes |
|---|---|---|
| Texas | Unlimited (up to 10 acres urban, 100/200 acres rural) | Acreage limit, not dollar limit |
| Florida | Unlimited (up to 1/2 acre urban, 160 acres rural) | Acreage limit, not dollar limit |
| Kansas | Unlimited (up to 1 acre urban, 160 acres rural) | Acreage limit, not dollar limit |
| California (System 1) | $300,000 to $600,000 (varies by county median home price) | Increased significantly in 2021 |
| New York | $179,950 to $399,975 (varies by county) | Higher in NYC metro area |
| Massachusetts | $500,000 | Automatic; $1M if elderly/disabled |
| Minnesota | $450,000 ($1,125,000 for agriculture) | Generous for agricultural property |
| Missouri | $15,000 | One of the lowest in the country |
| New Jersey | $0 (state law) | Must use federal exemption ($27,900) |
| Alabama | $16,450 | 160 acres max |
This is a selected sample. Amounts change periodically. Always verify current amounts with a local attorney or your state's statutes.
The 1,215-day rule limits homestead planning. Under 11 U.S.C. § 522(p), if you acquired your home within 1,215 days of filing, your homestead exemption is capped at $189,050 regardless of state law. This prevents people from buying expensive homes in unlimited-exemption states right before filing.
Even without an unlimited exemption, most homeowners keep their homes in Chapter 7. Many homeowners have little equity (especially if they have a mortgage), and the trustee must account for sale costs. If the net recovery for creditors would be minimal, the trustee typically abandons the property.