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Exploring the different ways in which a homestead exemption can affect a debtor under those two Federal Chapters is crucial. An informational site regarding homestead exemption under one of the chapters states that “If you’re filing Chapter 13 bankruptcy, the homestead exemption impacts how much, if any, is to be paid to creditors” (Lee 2022). Essentially, this differs greatly from the other chapter, in which states that “If a homeowner is filing Chapter 7 bankruptcy, the homestead exemption determines whether they are able to keep their home — or whether they would even file bankruptcy, since they are not likely to file if they have non-exempt equity” (Lee 2022). The laws of both chapters regarding homestead exemption result in different outcomes, and even though this can potentially hurt a debtor’s credit score as well as other dangers, a state homestead exemption alternative can offer a better assistance. For example, in states like Florida, a debtor filing bankruptcy is protected against a creditor’s compelling need to sell their homestead. This is found under Florida’s constitution, in which directly states how “There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon…the following property owned by a natural person” (Art. X, §4(a)(1), Fla. Const.) Similarly, the state of Texas provides sufficient benefits for debtors since it allows for a complete protection of a debtor’s home equity. The Federal Homestead Exemption fails to provide this amount of protection, even if it does allow you to have a “fresh start” in one’s economic life.

The entire United States’ population does not merely live in Florida or Texas, though. With those two states being considered the ultimate route for a friendly bankruptcy journey, other states provide adequate advantages for debtors in need. The only difference is that these other states have a limit of a homestead exemption amount, and rules do vary across these various states. The homestead exemption amount for North Carolina, for example, is approximately $35,000, whereas in Arizona, its exemption amount is around $150,000. Each state offers its own unique amount, but it technically falls under a projected scale, which is emphasized in the source cited that “More common, however, is a limit for protection from creditors that ranges between $5,000 and $500,000, depending on the state, with many states in the $30,000 to $50,000 range” (Kagan 2022). The states that offer the $5,000-10,000 homestead exemption may not be advantageous as opposed to a federal homestead. However, if a debtor chooses a state homestead exemption and lives in a state that offers little exemption amount, this route can provide numerous types of benefits that could outweigh its disadvantages. Taking Virginia as an example, its exemption amount is a whopping $5,000. The debtors who have chosen to stick to the state’s homestead exemption are not entirely doomed due to the fact that “The Virginia homestead exemption also allows individuals to deduct an additional $5,000 in real or personal property (including cash), or $10,000 if the debtor is 65 years of age or older” (O’Neill 2021). This enables a debtor living in Virginia to potentially avoid the risk of losing their home and assets, giving them another form of protection to substantially aid them in their trouble.

Besides, a state that offers more than $25,000 worth of a homestead exemption is far more advantageous than a federal homestead exemption. Massachusetts offers a $500,000 state homestead exemption that seems too good to be true. With a protection value that high, debtors often gravitate towards the state’s homestead exemption. Moreover, Massachusetts asserting its protection through its constitution gives debtors hope since it states that “A homestead declaration shall benefit each owner making the declaration and that owner’s family members who occupy or intend to occupy the home as their principal residence” (Art. X, §3(a), Mass. Const.) If debtors choose a federal homestead exemption in Massachusetts under either a chapter 7 or a chapter 13, their chances of a successful bankruptcy protection is low since the federal homestead exemption under the law is approximately around $23,000. In contrast to this, it is stated how “Under state law, all Massachusetts homesteads are automatically entitled to a maximum $125,000 exemption” (Kornblum).

Reducing property tax is acts as another beneficial aspect of a state’s homestead exemption law. In states such as Ohio, its homestead exemption allows for a debtor to be qualified for a potential tax reducing component. There are a few requirements to this, though, and it revolves around age and certain obligations that pertain to a debtor’s life. Moreover, According to Ohio’s homestead exemption, it states that “The homestead exemption is a valuable tax reduction providing Summit County homeowners an average savings of $535 per year” (Scalise). Having that as an option for a state’s homestead exemption is a fundamental aspect since it gives homeowner’s this flexibility of avoiding a potential bankruptcy situation.

While federal homestead exemption has its benefits to some states, its offerings are quite limited and scarce when in comparison to a state’s homestead exemption. A state’s homestead exemption can enable debtors and homeowners various outcomes of avoiding a bankruptcy case, while a federal one often sticks to a certain way of figuring out a potential solution. States often provide a homestead exemption solution that the federal law cannot due to the state’s pliability, which often involves an accommodation towards the debtor’s circumstances and issues. While weighing the benefits of your state’s homestead exemption law to the federal one is ideal, it should lean towards the file that can provide the utmost assistance and adaptation when it comes to bankruptcy and the potentiality of losing your entire property.

Works Cited

Lee , Jeanne . “What are homestead exemptions?” Bankrate, 17 Nov. 2022,

https://www.bankrate.com/real-estate/homestead-exemption/

Kagan , Julia . “Homestead Exemptions: Definition and How it Works, With State List.” Investopedia, 13 Jul. 2022,

https://www.investopedia.com/terms/h/homestead-exemption.asp.

O’Neill , Cara . “The Virginia Homestead Exemption.” Nolo, 9 Jul. 2022,

https://www.nolo.com/legal-encyclopedia/virginia-bankruptcy-homestead-exemption.html

Kornblum, Eric . “Massachusetts Bankruptcy Homestead Law.” DebtFreeMA,

https://debtfreema.com/practice-areas/massachusetts-bankruptcy-homestead-law/

Scalise , Kristen. “Homestead Exemption.” Fiscal Office,

www.fiscaloffice.summitoh.net/index.php/homestead-exemption.

Massachusetts. The Constitution of the State of Massachusetts, Adopted 1780 : with the Amendments Annexed. Boston :Richardson and Lord, 1826.